While it’s no surprise that the Commodity Futures Trading Commission reached a settlement with copper-market scourge Sumitomo Corp., the amount was a shocker: A $125 million fine, plus another $25 million in restitution for investor losses.
That $150 million bombshell, announced Monday, is believed to be the biggest civil monetary penalty ever assessed by a U.S. government agency. The Tokyo-based company is paying a much smaller penalty–$8 million–in a settlement with London regulators.
The charges stemmed from a copper-trading scandal that cost the company $2.6 billion in losses. CFTC investigators found that Sumitomo manipulated the world market for copper in 1995 and ’96, causing artificially high prices.
Sumitomo settled without admitting or denying guilt, and it avoided being banned from U.S. futures markets–the CFTC’s ultimate penalty. Additional charges against Sumitomo copper trader Yasuo Hamanaka and his alleged accomplices in the trading scheme could be forthcoming.
Meantime, the CFTC may be turning its attention from copper to coffee.
At least 23 traders in the coffee pit at New York’s Coffee, Sugar & Cocoa Exchange have been asked to turn over trading documents.
The requests are part of a routine examination, exchange President James Bowe told a reporter in Brazil. Spokesmen for the exchange and CFTC declined to comment on the matter.
Reprieve: Even as the proposed Cantor Financial Futures Exchange licks its wounds after a regulatory setback, the threat of electronic trading continues to weigh down membership seat prices at Chicago’s major exchanges.
The CFTC has shelved Cantor’s application for a new computerized trading system until Cantor Fitzgerald and the New York Cotton Exchange, partners in the venture, can answer 112 questions about their plans.
Not all the questions appear to be simple. The relationship between the Cantor trading firm and the planned exchange is probed at length; so, too, is the status of technicians who would enter bids and offers into the exchange computer. Regulators may want those computer jockeys registered as floor brokers.
At the Chicago Board of Trade, which stands to lose business if Cantor succeeds in trading U.S. Treasury futures via computer, officials could barely contain their glee. While the Cantor partners were saying they still plan to launch the system in mid-June, Board of Trade Chairman Patrick Arbor was scoffing. “They’re dreaming,” he said.
Of course, the glee is tempered by a decline in seat prices, which many attribute to the competitive threat of electronic trading. A full membership at the Board of Trade last sold Thursday at $625,000, down from a peak of $857,500 a year ago. At the Chicago Board Options Exchange, a seat last sold at $605,000 Thursday, down from a record $750,000 on March 11.
At the Chicago Mercantile Exchange, full memberships have plunged in price. A seat sold Monday for $385,000, down from $925,000 in ’94. Struggling to stem the tide, the Merc has hired consultant McKinsey & Co. to formulate a strategic plan by year’s end.
Higher energy: Merc Chairman Emeritus Leo Melamed is becoming an oil baron of sorts.
His Sakura Dellsher trading firm has taken over the 45-person energy group of Gerald Inc. Melamed’s firm will have about 150 employees.
Melamed said he whetted his appetite for energy in October by establishing a “highly profitable” three-member branch office in San Antonio.
Financial deregulation in Japan will give him the opportunity for additional expansion, he said. “We will see new energy business out of Tokyo.”
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