Boston, MA 03/26/2014 (wallstreetpr) – Morgan Stanley (NYSE:MS) has accorded to settle the civil charges made on it for exceeding the speculative limits of Soymeal futures. The company topped the limit while trying to insure that the company does not end up with losses in commodity index investment. The company will be paying a fine worth $200,000 in order to settle the charges.
Although the fine charged to the company is small, it shows why tougher rules should be applied for tighter speculative limits of other major raw materials like metals and oil.
According to the U.S. Commodity Futures trading Commission (CFTC), the company topped the speculative position limit of soybean meal instituted by the regulator for all months. This happened in January 2013 while trading with the Chicago Board of trade.
Working of CFTC
CFTC has put a lot of effort to implement position limits on a large number of commodity markets. Although position limits was limited to agricultural markets only, but Congress gave CFTC more powers to implement it on other markets as well in order to control financial crisis.
Since then CFTC has acted quite aggressively and has taken severe action against firms for the violation of position limits. The CFTC has acted 13 times since 2008 for the violation of speculative position limits which also includes the latest civil charge and fine against Morgan Stanley (NYSE:MS). The company topped the limit of positions on January 14 and CFTC reduced its position on January 15 and charged the firm for rule violation.
Effect on MG
The civil charge against Morgan Stanley (NYSE:MS) led to 40% fall in the commodity revenue of the firm which was the second annual drop for the firm. The lowering revenues led to restrictions on bank trade with their own money and also increased public scrutiny on the raw materials supply chains.
