The U.S. Commodity Futures Trading Commission will settle an investigation into manipulation of the natural gas market with a subsidiary of French oil company Total SA and a Houston gas trader for $3.6 million, according to a press release today.
The company was accused of manipulating monthly index settlement prices through natural gas prices at trading hubs in Texas during 2011 and 2012. During some of the bid-weeks in these years, Total was one of the largest traders even though they had no material business (in terms of customers, assets or transportation) at the locations in Texas.
The strategy of losing money in the natural gas market to benefit larger leveraged positions in a different market, such as a financial index, has been under investigation by both the CFTC and the Federal Energy Regulatory Commission. Several companies have been targeted by the investigations. One of the companies which had already settled was a subsidiary of JP Morgan Chase – it agreed to pay $410 million to FERC in 2013.
The CFTC, which regulates trading in other commodities such as gold and oil as well, has also been involved in a number of other investigations over commodities manipulation and price fixing in the last few years. Although two of the largest (LIBOR and FOREX fixing) involved investment banks, there have been investigations into companies selling commodities, such as oil, also.
The CFTC whistleblower program, created by Dodd-Frank, offers to pay financial incentives to whistleblowers who provide information concerning violations of the Commodity Exchange Act that result in monetary sanctions in excess of $1 million. Whistleblowers who are eligible under the terms of the law receive rewards of between 10 and 30 percent of the sanction.