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JPMorgan fined for wash trades in oil, gasoline


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JPMorgan fined for wash trades in oil, gasoline

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(Reuters) - JPMorgan Chase & Co executed wash trades on 10 separate occasions in U.S. crude oil and gasoline futures in the first half of last year in an effort to manage position limits, the operator of the New York Mercantile Exchange (NYMEX) said in a disciplinary notice on Friday.

Wash trades involve having the same dealer on opposite sides of the same trade, essentially selling to yourself, and are banned under exchange rules.

CME Group, which operates NYMEX, ordered JPMorgan to pay a fine of $30,000. One of the JPMorgan traders, Ebele Emelumadu, was fined a further $10,000.

The $30,000 fine, equivalent to just over one millionth of JPMorgan's total employee compensation last year of $29 billion, comes as the bank's trading practices are already under the spotlight after the now-infamous 'London Whale' racked up huge losses for the firm.

Excessive speculation and energy price manipulation are also hot political topics during this U.S. election year. The U.S. Commodity Futures Trading Commission (CFTC) is bringing in tighter position limits to try and curb the impact of individual firms on oil and other commodity prices.

"On 10 separate occasions between January 1, 2011, and June 30, 2011, in an effort to manage position limits, traders employed by JPM executed block trades between separate legal entities with the same beneficial owner in WTI or Gasoline," the notice said, referring to West Texas Intermediate (WTI), the main U.S. crude oil futures contract.

"The (NYMEX Business Conduct Committee) Panel also found that in each of these 10 instances, the trader was the sole decision maker for both the buy and sell side of the trade."

In the first six months of 2011, U.S. crude oil prices rallied from around $91 a barrel to a post-2008 peak of $114.83 a barrel, before falling back to around $95 a barrel.

On Friday, U.S. crude oil was trading around $83 a barrel.

As part of the settlement, JPMorgan "neither admitted nor denied the rule violations," the notice said. A JPMorgan spokeswoman did not respond to an email seeking comment.

In a further settlement, Emelumadu, the JPMorgan trader, also neither admitted or denied she had violated any rules. The disciplinary notice said the NYMEX Business Conduct Committee had found Emelumadu had executed wash trades in U.S. crude oil futures on 8 separate occasions in the first six months of 2011.

NERDS No. 1

Nigerian-born Emelumadu is an electrical engineering graduate of New York's prestigious Cooper Union school, according to a December 2006 article on Crain's New York Business called "Nerds No. 1".

In the article, detailing how engineering graduates were in high demand from banks, Emelumadu says she was set to join JPMorgan's energy and currency trading team as a broker in June 2007, shortly after her graduation.

Cooper Union is famous for being one of the most selective schools in the United States, due, in part, to offering full-scholarships to every student that makes it in. The Albert Nerken School of Engineering is the largest of Cooper Union's schools.

Reuters was not immediately able to contact Emelumadu for comment on the disciplinary notice.


JPMorgan fined for wash trades in oil, gasoline | Reuters

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June 1, 2012


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