Royal Bank of Canada accused by US regulator of “wash trading“
03 April 2012
The Royal Bank of Canada has been accused by the US futures regulator of running a "trading scheme of massive proportion" to gain lucrative Canadian tax benefits.
The Commodity Futures Trading Commission (CFTC) in a civil lawsuit has alleged that a small group of senior RBC employees created and managed a "wash trading" strategy to allow improper coordination among subsidiaries of the bank to buy and sell stock futures without taking a position in the market.
According to the CFTC, the scheme operated from at least June 2007 to May 2010 and involved hundreds of millions of dollars in trades.
The lawsuit, filed yesterday in the Southern District of New York, further said RBC concealed and made false statements about its wash trading scheme to the futures exchange CME Group Inc.
Wash trades that involve the simultaneous and offsetting purchase and sale of a contract, are banned under US futures law. No RBC employees were named by the CFTC in its complaint.
Terming the allegations as ''absurd'' the CFTC said the exchanges reviewed and monitored the trades in question.