CFTC sues broker for trying to manipulate wheat futures prices

Tue Dec 4, 2012 5:19pm EST

* Broker entered, canceled large orders within seconds -CFTC

* Orders placed to profit from resulting price moves -CFTC

* Alleged violations occurred in October 2009

* Regulators seek fines, trading bans

CHICAGO, Dec 4 (Reuters) - U.S. regulators on Tuesday sued a futures broker and two trading companies for attempting to manipulate wheat futures prices by electronically entering and immediately cancelling orders they did not intend to fill.

The Commodity Futures Trading Commission said Eric Moncada, who worked for BES Capital LLC and Serdika LLC in New York, in October 2009 entered and canceled within seconds numerous orders for 200 or more wheat contracts on the Chicago Board of Trade.

Moncada, BES and Serdika could not be reached for comment. The companies, which have ceased trading, shared offices and ownership, the CFTC said in the court documents. Moncada is currently working as a futures trader in New York, the CFTC said.

CME Group, owner of the Board of Trade, did not immediately respond to a request for comment.

Through his alleged scheme, Moncada attempted to create a misleading impression of increasing liquidity to move prices upward and downward at different times, the CFTC said in the complaint filed in the U.S. District Court for the Southern District of New York.

As he was entering and canceling orders, Moncada placed smaller orders to take advantage of any resulting price movements in the market, the CFTC alleged.

His "manipulative scheme was intended to capture immediate gains over a short period of time," the CFTC said in the complaint.

The Board of Trade trades a variety of wheat used to make cakes and snack foods and is the benchmark for wheat prices around the world.

Moncada's alleged scheme "undermines the integrity of the market," David Meister, director of the CFTC's Division of Enforcement, said in a statement.

During eight days in October 2009, Moncada manually entered a total of 710 orders for 200 or more wheat contracts and manually canceled at least 98 percent of them, according to the complaint.

On average, the orders were canceled within approximately 2.06 seconds of entry and as quickly as 0.226 second, the CFTC said.

The CFTC also said BES, Serdika, Moncada and other employees of the companies engaged in illegal fictitious sales of CBOT wheat contracts.

Moncada admitted that he simultaneously placed offsetting orders in BES and Serdika accounts in an effort to "transfer" or move the positions from a BES account to a Serdika account, according to the CFTC.

The CFTC is seeking monetary fines from Moncada and the companies; trading and registration bans; and permanent injunctions against further violations of federal commodities laws.

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