The CFTC simultaneously filed and settled charges against Ecoval Dairy Trade, Inc, in connection with alleged price manipulation of Non Fat Dairy Milk (“NFDM”) futures contracts on the Chicago Mercantile Exchange (“CME”). Ecoval has neither confirmed nor denied the Commission’s charges, but has settled and will pay $1.4 million in civil monetary penalty.
According to the CFTC order, Ecoval began to formulate and implement a manipulation strategy to inflate NFDM prices in order to short the market. Emails explaining that traders were “[s]till selling short NFDM but at higher prices…trying to push the market higher in order to obtain a better sales price for 2008,”are included as evidence.
The CFTC claims Ecoval may have manipulated prices using several strategies: (1) “lifting orders” and then immediately bidding higher than paid in the trade; (2) placing high bids and offers to raise the price range; (3) bidding above the opening price across multiple contracts; and (4) bidding, then cancelling bids without ever intending to fill them. From December 2007 through July 2008, the CFTC claims Ecoval used this strategy to push up prices in the illiquid NFDM market, creating a disparity between futures prices and cash prices.