WASHINGTON, Tue Jun 5, 2012 – Morgan Stanley agreed to pay $5 million to settle charges brought by the Commodity Futures Trading Commission that it executed unlawful noncompetitive trades, the agency said on Tuesday.
The bank executed, processed and reported off-exchange futures trades to the Chicago Mercantile Exchange and Chicago Board of Trade as exchanges for related positions over an 18-month period from 2008 to 2009, according to the CFTC.
The EFRPs constituted “fictitious sales” because the futures trades were executed noncompetitively and not in accordance with exchange rules, the CFTC said.
“The laws requiring that futures trades be executed on an exchange serve important price discovery and transparency principles,” said CFTC enforcement director David Meister.
“When a (broker) reports that it properly conducted an off-exchange futures trade as part of an EFRP, that report had better be accurate.”
A spokeswoman for Morgan Stanley said that bank was pleased to settle the charges.
“Morgan Stanley cooperated fully with exchange staff in the matter,” Mary Claire Delaney said in an email, noting that the order did not find any to customers.
She also said the settlement relates to trades initiated by a single former salesperson.
In the order, the CFTC said the bank “failed to supervise diligently its employees’ handling of the trades at issue.”