NEW YORK (Reuters) - JPMorgan Chase & Co executed wash trades on 10 separate occasions in U.S. crude oil and gasoline futures in the first half of 2011, the operator of the New York Mercantile Exchange (NYMEX) said in a disciplinary notice on Friday.
Banned under exchange rules, wash trades involve having the same dealer on opposite sides of one trade, simultaneously buying and selling the same commodity.
CME Group, which operates NYMEX, ordered JPMorgan to pay a fine of $30,000. One of the JPMorgan traders, Ebele Emelumadu, was fined a further $10,000.
The $30,000 fine, equivalent to just over one millionth of JPMorgan’s total employee compensation last year of $29 billion, comes as the bank’s trading practices are already under the spotlight after the now-infamous ‘London Whale’ racked up huge losses for the firm.
Excessive speculation and energy price manipulation are also hot political topics during this U.S. election year. The U.S. Commodity Futures Trading Commission (CFTC) is bringing in tighter position limits to try and curb the impact of individual firms on oil and other commodity prices.
“On 10 separate occasions between January 1, 2011, and June 30, 2011, in an effort to manage position limits, traders employed by JPM executed block trades between separate legal entities with the same beneficial owner in WTI or Gasoline,” the notice said, referring to West Texas Intermediate (WTI), the main U.S. crude oil futures contract.
“The (NYMEX Business Conduct Committee) Panel also found that in each of these 10 instances, the trader was the sole decision maker for both the buy and sell side of the trade.”
In the first six months of 2011, U.S. crude oil prices rallied from around $91 a barrel to a post-2008 peak of $114.83 a barrel, before falling back to around $95 a barrel.
On Friday, U.S. crude oil was trading around $83 a barrel.
As part of the settlement, JPMorgan “neither admitted nor denied the rule violations,” the notice said. A JPMorgan spokeswoman declined further comment on the settlement.
In a further settlement, Emelumadu, one of the JPMorgan traders, also neither admitted or denied she had violated any rules. The disciplinary notice said the NYMEX Business Conduct Committee had found Emelumadu had executed wash trades in U.S. crude oil futures on eight separate occasions in the first six months of 2011.
Reuters was not immediately able to reach Nigerian-born Emelumadu for comment on the disciplinary notice, but a JPMorgan spokeswoman said she was still employed by the firm.
“We’re confident that Ebele’s (Emelumadu) intentions were blameless,” the JPMorgan spokeswoman said. “She is a valued member of our team.”
Emelumadu is an electrical engineering graduate of New York’s prestigious Cooper Union school, according to a December 2006 article on www.crainsnewyork.com called “Nerds No. 1”.
In the article, detailing how engineering graduates were highly sought after by banks, Emelumadu says she was set to join JPMorgan’s energy and currency trading team as a broker in June 2007, shortly after her graduation.
An update on her Facebook page in March changed her location to London, though it was not clear if she is currently based in London for JPMorgan.
Cooper Union is one of the most selective schools in the United States and the Albert Nerken School of Engineering is the largest of Cooper Union’s schools.
Reporting by David Sheppard. Editing by Phil Berlowitz, Tim Dobbyn and Bernadette Baum