By Tom Polansek
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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