ICE slaps BNP, ABN AMRO with rare fines
* Failure to close out expiring positions "appropriately"
* ICE says introducing fixed position limits for gas oil
By David Sheppard and Emma Farge
NEW YORK/LONDON, April 8 (Reuters) - The InterContinentalExchange (ICE.N) fined ABN AMRO and BNP Paribas (BNPP.PA) on Friday for failing to properly close out crude and gas oil futures positions, only the third and fourth such fines in the past 4 years.
The small fines, totaling just over $130,000 between the two banks, followed similar action against JP Morgan (JPM.N) and UBS (UBSN.VX) in July and December of last year.
Regulators globally have been seeking to toughen limits on speculation.
On Friday, ICE said it would introduce fixed position limits on its gas oil contract, rather than operating a looser 'position management' system. [ID:nLDE7371WC]
Traders said the exchange may want to get ahead of European regulators as they look to follow the U.S. Commodity Futures Trading Commission (CFTC) in setting a formal cap on the number of positions any trader can hold. [ID:nLDE7371WC]
ABN AMRO Clearing Bank N.V. was fined 30,000 pounds sterling ($49,125) for failing to "appropriately close out positions in the May 2011 expiry month of the Exchange's WTI crude oil contract," ICE said in a disciplinary notice.
The Dutch clearing bank completed its post-financial crisis merger with major commodity player Fortis in July 2010.
BNP Paribas was fined 50,000 pounds sterling ($81,850) for the same offense in the expiring December 2010 ICE gas oil LGOc1 contract, ICE said.
Prior to last year, ICE had not issued any disciplinary notices related to its ICE Futures Europe division, which includes the benchmark Brent and gas oil contracts as well as a look-like U.S. crude future, since 2007.
Britain's Financial Services Authority (FSA), which oversees exchanges in London, has not intervened to close or reduce trading positions in commodity markets since the start of 2010, a Reuters Freedom of Information (FOI) request showed last month. [ID:nLDE72K1WK]
The actions of ABN AMRO and BNP both led to a significant overstatement of the open interest published for the contract, according to the disciplinary notices.
ICE said, "the accurate reporting of open interest is a critical process in maintaining confidence in the Exchange and its contracts."
ICE's West Texas Intermediate (WTI) contract is a look-a-like of the U.S. benchmark oil contract CLc1 traded in New York, and has been regulated by the CFTC since 2008 after complaints there was a 'London Loophole' allowing hidden speculation in the world's most actively traded oil contract.
Data from the CFTC on Friday showed speculators have increased net-long positions in the ICE WTI contract close to an all-time record high in recent days, as prices in New York jumped to a 2-1/2 year oeak of $113.21 a barrel. [CFTC/]
Click here for ICE WTI graphic:
CFTC graphics package: r.reuters.com/buv87r
The FSA does not publish data on oil contracts traded on London exchanges.
The ICE gas oil LGOc1 is the flagship European oil product future and it has seen a huge increase in trading volume in recent years. In 2010 alone, trading volume rose by 45 percent, according to exchange data.
(Reporting by David Sheppard and Emma Farge; Editing by David Gregorio)
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