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Friday, August 12, 2022
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CME Group fines Andersons $2 million for trading rules violations

CME Group

According to CME, The Andersons registered 2,000 contracts of wheat certificates for delivery against CBOT December 2017 wheat futures in an effort to manipulate the spread, or price difference, between futures contracts

CME Group, parent of the Chicago Board of Trade (CBOT), has ordered The Andersons Inc, an Ohio-based grain business, to pay a $2 million fine for violating futures trading rules in late 2017, the exchange said in a statement on Friday.

The Andersons confirmed the settlement in a statement to Reuters and said it cooperated with the CME’s investigation.

We do not believe we engaged in any wrongdoing, it said in the statement.

The 6th-largest U.S. commercial grain handler by capacity operates several Ohio grain warehouses that also serve as delivery points for CBOT wheat futures.

According to CME, The Andersons registered 2,000 contracts of wheat certificates for delivery against CBOT December 2017 wheat futures on Nov. 29, 2017 – a day before the first notice day for deliveries – in an effort to manipulate the spread, or price difference, between futures contracts.

At the time, the wheat registrations surprised traders, and CBOT December futures fell sharply the next day, widening the price spread between the December and back-month contracts. The exchange said The Andersons placed bids in futures spreads in anticipation of the market impact of its delivery registrations.

A large number of CBOT delivery registrations can signal that end-users such as flour mills are amply supplied and that there is plenty of wheat to go around. That information, in turn, can depress futures prices.

The Andersons registered the certificates with the belief that the wheat spread would widen and trade into its resting bids. The Andersons then re-purchased certificates at reduced prices, the CME Group statement said. In the month leading up to the first notice day, the Andersons sold wheat to flour mills in the Toledo, Ohio, area in order to limit demand for the grain, the CME statement said. Such a move could further support the perception of weak cash-market demand, one trader said.

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