UNITED STATES OF AMERICA

Before the

COMMODITY FUTURES TRADING COMMISSION

In the Matter of:

Ecoval Dairy Trade, Inc.

Respondent.

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CFTC DOCKET NO. 11-1~~ -

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ORDER INSTITUTING PROCEEDINGS =-on n

PURSUANT TO SECTION$:'~'(tfAND;;(d) OF THE COMMODITY EXCi:IAN'GE:¥ n (\)

ACT, MAKING FINDINGS t\.IiP" .. . c.

IMPOSING REMEDIAL SANCTIONS:::>

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The Commodity Futures Trading Commission ("Commission") has reason to believe

thatt from September 21 t 2007 to October 17t 2007t Ecoval Dairy Tradet Inc. ("Ecoval" or

"Respondenf') violated Sections 6(c), 6(d)t and 9(a)(2) ofthe Commodity Exchange Act (the

"Act"), 7 U.S.C. §§ 9t 13b, and 13(a)(2) (2006). Thereforet the Commission deems it

appropriate and in the public interest that public administrative proceedings be, and hereby are,

instituted to determine whether Respondent engaged in the violations set forth herein and to

determine whether any order should be issued imposing remedial sanctions.

II.

In anticipation ofthe institution of an administrative proceeding, the Respondent has

submitted an Offer of Settlement (the "Offer"), which the Commission has determined to accept.

Without admitting or denying any ofthe findings or conclusions hereint Respondent consents to

the entry ofthis Order Instituting Proceedings Pursuant to Sections 6(c) and 6(d) ofthe

Commodity Exchange Actt Making Findings and Imposing Remedial Sanctions ("Order") and

acknowledges service ofthis Order. I

Respondent consents to the use ofthese findings in this proceeding and in any other

proceeding brought by the Commission or to which the Commission is a party; provided,

howevert that Respondent does not consent to the use ofthe Offer, or the findings or conclusions

in this Order consented to in the Offer, as the sole basis for any other proceeding brought by the

Commissiont other than in a proceeding in bankruptcy or to enforce the terms ofthis Order. Nor

does Respondent consent to the use ofthe Offer or this Ordert or the findings or conclusions

consented to in the Offer or this Ordert by any other party in any other proceeding.
III.

The Commission finds the following:

A. SUMMARY

During the period from September 21,2007 through October 17,2007 (the "Relevant

Period"), Ecoval attempted to manipulate the daily settlement prices of each ofthe Chicago

Mercantile Exchange ("CME") Non Fat Dry Milk ("NFDM") monthly commodity futures

contracts for December 2007 through July 2008. Ecoval executed various trading strategies on

the electronic market trading platform, Globex, with the intent to "push" the prices ofthese

NFDM futures contracts higher so Ecoval could potentially establish a large short position in

these NFDM futures contracts at higher prices.

B. RESPONDENT

Ecoval Dairy Trade, Inc. is a Pennsylvania corporation with its principal place of

business located in Wayne, Pennsylvania. During the Relevant Period, Ecoval, a company of

less than twenty employees, bought and sold physical dairy commodities, domestically and

internationally, and regularly traded various dairy commodity futures contracts, including

NFDM. Ecoval has never been registered with the Commission in any capacity.

C. FACTS

During the Relevant Period, the NFDM futures market was illiquid and thinly traded. It

carried an average total open interest across all of its twenty-four contract months of

approximately 100 to 150 contracts. During the Relevant Period, market conditions reflected a

disparity between near month NFDM futures prices and cash prices. The CME began electronic

trading ofNFDM futures contracts through Globex beginning on September 17,2007. From this

date forward, NFDM futures trading could be performed either electronically or in the trading

pit, although the overwhelming majority ofNFDM futures trading occurred in the electronic

market. In fact, during the Relevant Period, there was minimal bid and offer activity in the pit,

with only one NFDM trade occurring in the pit, and only twelve market participants active in the

electronic market. This NFDM futures contract is cash-settled.

Starting on September 21,2007, Ecoval, by and through its employees, formulated a

strategy, explained in several emails, stating its intent to try to "push" NFDM futures contracts

higher than existing market forces dictated so Ecoval could potentially establish large short

positions in monthly NFDM futures contracts at higher prices. For example, Ecoval stated that it

was, "trying to push the market a bit higher in order to get a higher sales prices [sic];" "[in]

NFDM, we're adding shorts but trying to obtain a higher price;" and "[s]till selling short NFDM

but at higher prices, we're trying to push the market higher in order to obtain a better sales price

for 2008."

Ecoval attempted to manipulate the NFDM market by utilizing various trading strategies,

including, but not limited to, the following: I) executing trades by "lifting" offers, and then

immediately bidding a higher price than just paid in the trade; 2) placing both bids and offers

above prevailing market prices across multiple contract months in order to establish higher price

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ranges in the market; 3) consistently placing bids above the opening price or the prevailing price

across multiple contracts; and 4) bidding, and then quickly cancelling the bids, without the intent

to have the bids filled.

Ecoval engaged in the foregoing conduct with the intent to affect the daily settlement

prices of December 2007 through July 2008 NFDM futures contracts so Ecoval could potentially

establish a large short position in these same NFDM futures contracts at higher prices.

D. LEGAL DISCUSSION

Section 9(a)(2) ofthe Act makes it unlawful for "[a]ny person to manipulate or attempt to

manipulate the price of any commodity in interstate commerce, or for future delivery on or

subject to the rules of any registered entity...." 7 U.S.C. § 13(a)(2) (2006). Sections 6(c) and

6(d) ofthe Act, 7 U.S.C. §§ 9 and 13b (2006), authorize the Commission to serve a complaint

and provide for the imposition of, among other things, civil monetary penalties and cease and

desist orders ifthe Commission has reason to believe that "any person ... has manipulated or

attempted to manipulate the market price of any commodity... for future delivery on or subject

to the rules of any registered entity ... or otherwise is violating or has violated any ofthe

provisions of [the] Act. ..."

The following elements are required to prove an attempted manipulation: (I) an intent to

affect the market price of a commodity; and (2) an overt act in furtherance ofthat intent. See In

re Hohenberg Bros. Co., [1975-1977 Transfer Binder] Comm. Fut. L. Rep. (CCH) 20,271 at

21,477 (CFTC Feb. 18, 1977); CFTC v. Bradley, 408 F. Supp. 2d 1214, 1220 (N.D. Okla. 2005).

"Intent is the essence ofmanipulation...the intent ofthe parties is the determinative element in a

punishable manipulation....It is the intent ofthe parties which separates otherwise lawful

business conduct from unlawful manipulative activity." In re Indiana Farm Bureau [1982-1984

Transfer Binder] Comm. Fut. L. Rep. (CCH) 21,796 at 27,282-27,283 (CFTC Dec. 17, 1982).

Proofof manipulative intent will most often be circumstantial in nature and thus it often can be

shown inferentially from the conduct ofthe accused. Indiana Farm Bureau, 21,796 at 27,283.

The type of conduct alleged can be based on a particular trading strategy. CFTC v. Amaranth

Advisors, LLC, 554 F. Supp. 2d 523,531 (S.D.N.Y. 2008). "Because every transaction signals

that the buyer and seller have legitimate economic motives for the transaction, if either party

lacks that motivation, the signal is inaccurate. Thus, a legitimate transaction combined with an

improper motive is commodities manipulation." In re Amaranth Natural Gas Commodities

Litigation, 587 F. Supp. 2d 513, 534 (S.D.N.Y. 2008).

During the Relevant Period, Ecoval, by and through its employees, used various trading

strategies in an attempt to "push" the NFDM futures market higher with the intent to affect the

daily settlement prices in certain NFDM futures contracts.2

See In re DiPlacido, [2007-2009 Transfer Binder] Comm. Fut. L. Rep. (CCH) 30,970 at

62,484 (CFTC Nov. 5,2008) ("[S]ettlement prices are market prices that can be manipulated.").

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By this conduct, Ecoval, through the acts ofits employees, violated Sections 6(c), 6(d),

and 9(a)(2) ofthe Act.3

IV.

FINDINGS OF VIOLATIONS

The Commission finds that, during the Relevant Period, Ecoval violated Sections 6(c),

6(d), and 9(a)(2) ofthe Act, 7 U.S.C. §§ 9, 13b, and 13(a)(2) (2006), by attempting to manipulate

the daily settlement prices for the December 2007 through July 2008 NFDM futures contracts.

V.

OFFER OF SETTLEMENT

Respondent has submitted the Offer in which it, without admitting or denying the

findings and conclusions herein: acknowledges receipt ofservice ofthis Order; admits the

jurisdiction ofthe Commission with respect to all matters set forth in this Order and for any

action or proceeding brought or authorized by the Commission based upon violations ofor for

enforcement ofthis Order; and waives the filing and service of a complaint and notice of

hearing, a hearing, all post-hearing procedures, judicial review by any court, any and all

objections to the participation by any member ofthe Commission's staffin the Commission's

consideration ofthe Offer, any claim of Double Jeopardy based upon the institution ofthis

proceeding or the entry in this proceeding of any order imposing a civil monetary penalty or any

other relief, any and all claims that it may possess under the Equal Access to Justice Act, 5

U.S.C. § 504 (2006) and 28 U.S.C. § 2412 (2006), andlorthe rules promulgated by the

Commission in conformity therewith, Part 148 ofthe Commission's Regulations, 17 C.F.R. §§

148.1-30 (2010), relating to, or arising from, this proceeding or the entry in this proceeding of

any order imposing a civil monetary penalty or any other relief, and any and all claims that it

may possess under the Small Business Regulatory Enforcement Fairness Act of 1996, Pub. L.

No. 104-121, §§ 201-253, 110 Stat. 847, 857-868 (1996), as amended by Pub. L. No. 110-28,

§ 8302, 121 Stat. 112,204-205 (2007), relating to, or arising from, this proceeding.

Respondent stipulates that the record basis on which this Order is entered consists solely

ofthe findings contained in this Order to which Respondent has consented in the Offer.

Respondent consents to the Commission's issuance ofthis Order. Pursuant to the Offer,

Respondent agrees and consents, solely on the basis ofthe Offer, to entry ofthis Order that:

makes findings by the Commission that Respondent violated Sections 6(c), 6(d), and 9(a)(2) of

the Act, 7 U.S.C. §§ 9, 13b, and 13(a)(2) (2006); orders Respondent to cease and desist from

Ecoval is liable for the actions ofits employees who acted as its employee and/or agent in

trading on behalf of Ecoval. Under Section 2(a)(l)(B) ofthe Act, 7 U.S.C. § 2(a)(I)(B) (2006),

and Regulation 1.2, 17 C.F.R. § 1.2 (2010), the act, omission, or failure of any official, agent or

other person acting for any individual, association, partnership, corporation, or trust within the

scope of his employment or office shall be deemed the act, omission, or failure ofsuch

individual, association, partnership, corporation or trust.

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violating the provisions ofthe Act, as amended, to be codified at 7 U.S.C. § I et. seq., that it has

been found to have violated; orders Respondent to pay a civil monetary penalty in the amount of

one million four hundred and twenty-five thousand dollars ($1,425,000), within ten (10) business

days ofthe date ofthe entry ofthis Order; and orders Respondent to comply with the conditions

and undertakings consented to in the Offer and as set forth in this Order.

Upon consideration, the Commission has determined to accept the Offer.

VI.

ORDER

Accordingly, IT IS HEREBY ORDERED THAT:

I. Respondent Ecoval shall cease and desist from violating Sections 6(c), 6(d), and 9(a)(2)

ofthe Act, as amended by the Food, Conservation, and Energy Act of2008, Pub. L. No.

110-246, Title XIII (the CFTC Reauthorization Act of 2008), §§ 13101-13204, 122 Stat.

1651 (enacted June 18, 2008);

2. Respondent shall pay a civil monetary penalty in the amount of one million four hundred

and twenty-five thousand dollars ($1,425,000) within ten (10) days ofthe date ofthe

entry ofthis Order. Ifthis civil monetary penalty is not paid within ten (10) days ofthe

date ofthe entry ofthis Order, then post-judgment interest shall accrue commencing on

the date of entry ofthis Order and shall be determined by using the Treasury Bill rate

prevailing on the date of entry ofthis Order pursuant to 28 U.S.C. § 1961. Respondent

shall pay its civil monetary penalty by electronic funds transfer, U.S. postal money order,

certified check, bank cashier's check, or bank money order. Ifpayment is to be made

other than by electronic funds transfer, the payment shall be made payable to the

Commodity Futures Trading Commission and sent to the address below:

Commodity Futures Trading Commission

Division of Enforcement

Attn: Marie Bateman - AMZ-300

DOTIFANMMAC

6500 S. MacArthur Blvd.

Oklahoma City, OK 73169

Telephone: (405) 954-6569

If payment by electronic funds transfer is chosen, Respondent shall contact Marie

Bateman or her successor at the above address to receive payment instructions and shall

fully comply with those instructions. The Respondent shall accompany payment ofthe

civil monetary penalty with a cover letter that identifies the Respondent and the name and

docket number ofthis proceeding. The Respondent shall simultaneously transmit copies

ofthe cover letter and the form of payment to: (I) the Director, Division ofEnforcement,

Commodity Futures Trading Commission, Three Lafayette Centre, 1151 21 st Street, NW,

Washington, DC 20581; and (2) the Chief, Office ofCooperative Enforcement, Division

ofEnforcement, Commodity Futures Trading Commission at the same address. In

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accordance with Section 6(e)(2) ofthe Act, 7 V.S.C. §9a(2) (2006), ifthis amount is not

paid in full within fifteen (15) days ofthe due date, Respondent shall be prohibited

automatically from the privileges of all registered entities, and, ifRespondent is

registered with the Commission, such registration shall be suspended automatically until

Respondent has shown to the satisfaction ofthe Commission that payment ofthe full

amount ofthe civil monetary penalty with post-judgment interest thereon to the date of

the payment has been made; and

3. Respondent and its successors and assigns shall comply with the following undertakings

set forth in the Offer:

Actions or Public Statements

Respondent agrees that neither it nor any ofits successors or assigns, nor its

agents or employees under its authority or control shall take any action or make

any public statement denying, directly or indirectly, any finding or conclusion in

this Order or creating, or tending to create, the impression that this Order is

without a factual basis; provided, however, that nothing in this provision shall

affect Respondent's: (i) testimonial obligations; or (ii) right to take legal positions

in other proceedings to which the Commission is not a party. Respondent and its

successors and assigns shall undertake all steps necessary to ensure that all ofits

agents and/or employees under its authority or control understand and comply

with this undertaking.

4. Miscellaneous Provisions

Respondent agrees that:

a. This Order shall inure to the benefit of and be binding on successors,

assigns, beneficiaries and administrators ofRespondent; and

b. IfRespondent fails to comply with any ofthe conditions or undertakings

ofthis Order applicable to it, it shall be subject to further proceedings

pursuant to Sections 6(c) and 6(e)(2) ofthe Act, 7 V.S.c. §§ 9(c) and

9a(2), for violating this Order.

The provisions of this Order shall be effective as of this date.

By the Commission. M-4·,~ Secretary ofthe Commission

Commodity Futures Trading Commission

I Dated: _~Ju:.:..\y,-\~9:.- , 2011

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