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CFTC Cites Sempra for Trading Card Violations

The Commodity Futures Trading Commission (CFTC) last Thursday filed and simultaneously settled charges against Sempra Energy Trading LLC for falsifying information on trading cards with respect to natural gas futures trades on the New York Mercantile Exchange (Nymex) and ordered Sempra to pay a $175,000 civil penalty.

The CFTC found that on certain trading days between August and November 2004 Sempra Energy's floor brokers violated an agency regulation by failing to properly and accurately prepare trading cards in order to process trades that were made after the contract was no longer trading. The trades were "EFS" trades, which refer to an exchange of futures for, or in connection with, swaps, the agency said. The trades involved positions of several hundred lots.

On each of the trading dates at issue the natural gas trades took place outside of the permitted time period, the CFTC said, and thus did not accurately reflect the actual trade dates or listed trades entered out of exact chronological order in violation of CFTC regulations.

The CFTC order concluded that because Sempra Energy floor brokers undertook their actions within the scope of their employment, the San Diego, CA-based energy company was liable for its floor brokers' violations.

In unrelated action, the Wall Street Journal reported last Thursday that the CFTC is investigating whether energy companies are reporting false data to the federal government to influence perceptions about crude oil supply and demand.

Among other things, regulators are concerned that companies may be reporting inventory levels to the Energy Information Administratioon that benefit their own trading positions but that may not be accurate, the Journal article said, citing sources familiar with the probe. Energy Secretary Samuel Bodman said he was not aware of such an investigation.

The CFTC is expected to come out with a final report on speculation and manipulation of the oil market by Sept. 15 (see NGI, Sept. 1).

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