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CFTC imposes penalty on JPMorgan for breaching cotton futures position limits

The US Commodity Futures Trading Commission (CFTC) has imposed a civil monetary fine of $600,000 against JP Morgan Chase Bank (JPMCB) for violating speculative position limits in Cotton No. 2 futures contracts trading on the Intercontinental Exchange US (ICE).

The bank has been accused for holding short futures equivalent positions in Cotton No. 2 futures contracts in surplus of both the single-month and all-months speculative position limits set by CFTC during the period 16 September 2010 to 5 October 2010.

According to the US futures contracts market law, the CFTC’s speculative position limits for Cotton No. 2 futures are 3,500 contracts in one month and 5,000 contracts in all months together.

During the investigation, the US regulator found that the violation was the result of a technical issue in its automated position limit monitoring system.

The system is responsible for generating a report to enable commodity traders to track their current positions relative to the applicable speculative position limits.

CFTC has further added that despite using a manual position limit monitoring procedure, following the problem with the system, JPMCB still violated its short-side speculative position limit on several occasions during the period.

Apart from paying the penalty, JPMCB has been asked to refrain from further violations as charged.