The Australian Securities & Investments Commission (ASIC) has launched civil penalty proceedings in the Federal Court against COFCO International Australia and COFCO Resources SA, subsidiaries of COFCO International, alleging manipulation of Eastern Australia Wheat futures contracts.
The proceedings follow ASIC’s recent fine of JP Morgan Securities Australia for facilitating the allegedly manipulative trades. The allegations center on trades executed on the ASX24 market for Eastern Australia Wheat futures January 2023 (WMF3) contracts.
ASIC claims that between 17 January 2022 and 3 March 2022, COFCO manipulated WMF3 contracts on 34 occasions by placing orders shortly before the day session’s close on ASX24, a practice known as ‘marking the close’. This tactic, ASIC argues, artificially influenced the daily settlement price of the contracts, distorting the market’s genuine supply and demand dynamics.
According to ASIC’s court filings, Nicholas McGaw, an employee of COFCO Australia authorized by COFCO Resources, allegedly executed these trades. ASIC contends that McGaw’s actions were part of an arrangement where COFCO simultaneously entered into offsetting over-the-counter contracts to mitigate risk, thereby manipulating the WMF3 contract prices.
ASIC Chair Joe Longo emphasized the serious impact of such conduct on market integrity, stating, “This conduct is illegal; it erodes trust and confidence in our markets, increases costs for participants, hurts farmers, food manufacturers, importers and exporters, and impacts the prices Australians pay at the checkout.”
The regulatory body is seeking declarations and pecuniary penalties against both COFCO International Australia Pty Ltd and COFCO Resources SA. The Federal Court will schedule a case management hearing to address the matter.
This legal action underscores ASIC’s commitment to maintaining fairness and transparency in Australia’s commodity markets amidst global economic uncertainties.
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