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Cantor Fitzgerald Fined for Dirty Trading

WASHINGTON (CN) - Investment firm Cantor Fitzgerald & Co. agreed to pay $100,000 to settle accusations that it let one of its traders engage in market manipulating "wash sales."

A wash sale is when a party simultaneously purchases and sells a stock or future so that the two transactions negate each other and do not significantly alter the financial position of the party. Such sales can be used to artificially inflate or deflate the apparent demand for the commodity being traded.

Wash sales are "grave" violations of futures trading rules "because they undermine confidence in the market mechanism" that determines pricing, the Commodity Futures Trading Commission said in its charging documents.

According to the commission, a former Cantor Fitzgerald employee simultaneously entered orders with floor brokers from two different brokerages on the New York Mercantile Exchange to buy and sell gasoline futures for exactly the same quantity, price and contract month. The trades, which occurred in March and April, were entered for a single Cantor client and involved hundreds of futures contracts, according to the order charging the firm.

Cantor Fitzgerald, which became famous after its offices were destroyed and many of its traders were killed in the attacks on the World Trade Center on Sept. 11, agreed to settle the commission's charges without admitting or denying the findings of the order.

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