The U.S. Commodity Futures Trading Commission (CFTC) has imposed a $48 million civil monetary penalty on TOTSA TotalEnergies Trading SA, a trading unit of French oil giant TotalEnergies, for attempting to manipulate the gasoline futures market in 2018. This fine underscores the CFTC’s commitment to maintaining market integrity and enforcing compliance with the Commodity Exchange Act (CEA) and CFTC regulations.
Details of the Manipulation Attempt
According to the CFTC’s findings, TOTSA, headquartered in Switzerland and not registered with the CFTC, engaged in market manipulation involving EBOB-linked gasoline futures in March 2018. The firm was found to have:
Undercut Physical Gasoline Prices: TOTSA sold physical EBOB gasoline at prices significantly below those indicated by buyers, aiming to manipulate market prices.
Held a Large Short Position: The company maintained a substantial short position in March-settled EBOB-linked futures. A short position profits when prices fall, so by depressing the reported price of EBOB gasoline, TOTSA aimed to increase the value of its short futures position.
The strategy involved accepting lower revenue from physical gasoline sales to reduce the reported price of EBOB, thereby boosting the value of its futures position and overall trading profits.
Regulatory Actions and Penalties
Civil Monetary Penalty: The CFTC has ordered TOTSA to pay $48 million as a penalty for its actions.
Cease and Desist: TOTSA must halt all violations of the Commodity Exchange Act and CFTC regulations.
Director of Enforcement Ian McGinley emphasized the severity of the breach: “The scheme in this matter involved an attack on the market integrity of CFTC-regulated futures contracts on gasoline, and this settlement demonstrates such attacks will not be tolerated in any market.”
Investigation and Cooperation
The CFTC acknowledged that TOTSA cooperated to some extent during the investigation. However, the unit faced criticism for failing to timely produce WhatsApp communications as requested by the Division of Enforcement. The delayed or inadequate preservation of these communications resulted in the loss of potentially relevant evidence.
Impact and Industry Implications
This case highlights the CFTC’s vigilance in monitoring and enforcing fair trading practices in the futures markets. It serves as a warning to other market participants about the serious consequences of attempting to manipulate market prices. The substantial penalty reflects the gravity of the offense and aims to deter similar behavior in the future.
