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US: Shell Subsidiary Agrees to Settle Charges

Associated Press
January 4th, 2006

Federal commodity-trading regulators on Wednesday announced that a subsidiary of Royal Dutch Shell PLC has agreed to pay a $200,000 penalty to settle charges of making ''fictitious'' trades of crude oil futures contracts.

The Commodity Futures Trading Commission said Shell International Trading and Shipping Co. of London engaged in prearranged ''noncompetitive'' trades on the New York Mercantile Exchange with a U.S.-based Shell subsidiary, Shell Trading US Co., on five occasions between November 2003 and March 2004.

''In each instance, the traders prearranged the trade by agreeing on the quantity and the settlement month, and agreeing to take the opposite positions of the trade. There was no prearrangement as to price,'' the CFTC said in an order detailing the case against Shell.

The head trader at Shell Trading, Nigel Catterall of Sugarland, Texas, will pay an additional $100,000 to settle the charges. Catterall was involved in three of the five instances of alleged abuses, the CFTC said.

As part of its agreement to pay the fines, Shell neither admitted nor denied the CFTC's findings. Shell spokeswoman Darci Sinclair said in an e-mail that ''we are pleased that this matter has been brought to a close.''

Stephen Obie, a staff attorney at the CFTC's New York office, said that while the trades were agreed to before Nymex opened, and without a prearranged price, the transactions may very well have influenced the market.

''It's done at the market price and this has the potential to affect the fairness and integrity of the market,'' he said.

Obie would not provide a possible motive, describe the size of the trades, nor reveal the name of the brokerage that executed them.

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