Federal court fines broker $500,000 for 'banging the close' in PGM markets

A New York federal court has fined former MF Global broker Joseph F Welsh III $500,000 in settlement of a case brought in 2012, which charged him with "banging the close" in US platinum and palladium markets.

A New York federal court has fined former MF Global broker Joseph F Welsh III $500,000 in settlement of a case brought in 2012, which charged him with "banging the close" in US platinum and palladium markets.

In addition to the civil penalty, Welsh received a permanent ban on trading CFTC-regulated palladium and platinum products. Welsh must also complete a compliance training and reporting programme over the next five years, according to a release from the CFTC.

The court’s consent order relates to CFTC allegations that, between June 2006 and May 2008, Welsh made regular attempts to manipulate the settlement prices of palladium and platinum futures contracts listed on the New York Mercantile Exchange.

At this time, Welsh worked for commodities brokerage MF Global, and was found to have exerted upward pressure on platinum and palladium prices by accepting relatively large market-on-close orders for futures contracts from Christopher Louis Pia, then of Moore Capital Management. Welsh would process Pia’s orders during the last seconds of trading in a bid to push the futures prices up at a time when PGM markets were relatively illiquid.

An order against Pia was issued in July 2011 on similar charges, requiring that Pia pay a $1 million penalty, and permanently banning the former portfolio manager from trading CFTC-regulated palladium and platinum, and from trading CFTC products during closing periods.

Moore Capital Management, Moore Capital Advisors and Moore Advisors were served a $25 million penalty and a two-year restriction on trading in a related CFTC order in 2010. In August 2013, Metal Bulletin reported that Moore Capital had paid $48.4 million to settle the lawsuit.

Charlotte Radford
charlotte.radford@metalbulletin.com

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