Morgan Stanley, UBS fined on oil trade

Morgan Stanley is fined $14 million, and UBS is hit with a $200,000 penalty. Moore Capital is fined $25 million over platinum and palladium manipulation.

By Charley Blaine Apr 30, 2010 12:26PM
Overlooked in the the excitement about the news of a criminal probe of Goldman Sachs (GS) were reports that three other Wall Street houses were subject to government fines.

U.S. futures regulators fined Morgan Stanley (MS) $14 million for failing to report a big block oil trade and fined privately held Moore Capital $25 million for attempting to manipulate palladium and platinum futures.
The two settlements were announced late Thursday as the Commodity Futures Trading Commission begins to exert more authority over the markets it regulates and as Congress contemplates handing it far more power over the vast over-the-counter derivatives markets.

The CFTC also ordered UBS Securities (UBS) to pay a $200,000 penalty tied to the Morgan Stanley settlement.

The firms neither admitted nor denied the charges, the CFTC said.

Morgan Stanley was down 1.8% to $30.72 this afternoon; UBS was off 0.7% to $15.65.

The CFTC said a Morgan Stanley trader arranged a block crude oil trade with a UBS broker for Feb. 6, 2009, but the two agreed to delay reporting the trade until after the market closed.

NYMEX rules require block trades to be reported within five minutes of execution.

The CFTC also ordered Morgan Stanley to step up its training for traders and enhance its surveillance of trade-at-settlement block trades on the NYMEX for three years.

Morgan Stanley said it cooperated with the CFTC investigation. "As the CFTC indicates, this matter concerned an isolated request by a former Morgan Stanley trader," the company said.

UBS declined comment. The CFTC said UBS reported the incident and the potential violation after the company learned about the trade from its broker.

Separately, the CFTC fined Moore Capital Management -- one of the largest and most consistently profitable hedge funds -- for trying to manipulate the settlement prices of platinum and palladium futures contracts on the New York Mercantile Exchange.

The CFTC said Moore's fund portfolio manager tried to manipulate platinum and palladium futures from at least November 2007 through May 2008 by entering trades in the last 10 seconds of trading in a manner designed to exert upward pressure on the settlement prices.

The practice is known as "banging the close."

In addition to the fine, Moore Capital has restrictions on its trading activities for three years, including a two-year restriction on its trades within 15 minutes of and during the close in the platinum and palladium futures and options markets, the CFTC said.

Moore Capital said the individual involved in the settlement case left the company in the fall of 2008.


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