Commodity Futures Trading Commission Investigating Wash Sales of Futures Contracts at CME Group, Inc. and IntercontinentalExchange, Inc.

March 18, 2013 by Thomas F. Burke, P.C.

The Wall Street Journal, Bloomberg, and Reuters have all reported that the Commodity Futures Trading Commission ("CFTC") is allegedly examining whether high-frequency-trading firms are violating rules by using wash trades to artificially inflate volume and distort markets in futures contracts. Wash trading is the buying and selling of identical futures contracts through different futures commission merchants at the same time. Repeated wash trading is done to manipulate the market and induce others to trade.

Wash trades are banned under U.S. futures law. When wash trades occur, "it might appear to be liquidity, but it is not. It isn't really there. It's fantasy liquidity," Bart Chilton of the CFTC was to say in a speech last Sunday.

The CFTC investigation centers on trading related to crude oil, precious metals, agricultural commodities and the Standard & Poor's 500 stock index. The two primary exchange operators that handle such trades are the CME Group Inc. ("CME") and IntercontinentalExchange Inc. ("ICE"). Regulators reportedly are examining whether these exchanges' systems are sophisticated enough to prevent such trades from occurring.

"We actively enforce rules prohibiting wash trading, and we are in the process of developing technology to prevent wash trades as prohibited by CME and CFTC at the trading-engine level," a CME spokeswoman told the Wall Street Journal.

CME plans to introduce new technology in the middle of this year, she said. An ICE spokeswoman told the newspaper that the exchange operator has employed wash-trade filters for years, and "we continue to enhance them."

Neither CME not ICE would discuss details of communications with regulators about their filters. No exchange operator has been accused of wrongdoing, according to the Wall Street Journal.

Thomas F. Burke and Terrance Buehler collectively have more than sixty years of experience helping investors who have suffered losses as a result of misconduct. If you feel that you have been defrauded by your stockbroker, please contact Mr. Burke at 312/362-1300 or by email at