In the Matter of Morgan Stanley & Co., CFTC Docket No. 12-22. On June 5, 2012, the CFTC issued an order settling charges that, over an 18-month period, Morgan Stanley & Co. unlawfully executed, processed, and reported off-exchange futures trades to the Chicago Mercantile Exchange (“CME”) and Chicago Board of Trade (“CBOT”) as exchanges for related positions (“EFRPs”). The EFRPs were not lawful as they did not have the corresponding related cash, over-the counter swap, option or other derivative. The futures trades were “fictitious sales” because they were executed noncompetitively and against the exchange rules governing EFRPs. Further, the trades resulted in the reporting of non-bona fide prices, which violates the Commodity Exchange Act (“CEA”) and CFTC regulations. Without admitting or denying the charges, Morgan Stanley consented to an order requiring it to pay a $5 million civil monetary penalty and to cease and desist from further violations of CEA and CFTC regulations.
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