Putative Class Action Lawsuit Filed Against Major Ethanol Producer for Purported Manipulation of Key Ethanol Benchmark and Three-CME Group Exchanges-Traded Ethanol Derivatives Contracts


AOT Holding AG, a Swiss-based company with a trading subsidiary in Houston, Texas, filed a putative class action lawsuit against Archer Daniels Midland Company – a major ethanol producer – alleging that, from November 2017 through the present time, ADM routinely manipulated a principal ethanol pricing benchmark  – the Chicago Ethanol (Terminal) price – and three derivatives contracts traded on CME Group exchanges whose settlement prices were either based on or influenced by the benchmark. The three derivatives contracts were the Chicago Ethanol (Platts) futures contract and the Chicago Ethanol (Platts) Average Price options contracts traded on the New York Mercantile Exchange and the Ethanol futures contract traded on the Chicago Board of Trade. According to the plaintiff, during the relevant time, against its economic interest, ADM routinely sold large quantities of ethanol at very low prices during the last 30 minutes of daily trading (“Market on Close” or “MOC”) at the Kinder Morgan Argo Terminal in Argo, Illinois. This MOC trading was used by S&P Global Platts to set the daily ethanol benchmark price. AOT claimed that ADM engaged in this trading activity at the Argo terminal solely to benefit very large short positions it had accumulated in the three CME Group exchanges-traded derivatives. AOT claimed that ADM’s trading activity at the Argo terminal was inconsistent with its physical holdings of ethanol as it reduced its profit margins and decreased prices below ADM’s variable cost of production and was only conducted for manipulative purposes. AOT estimated that it sustained derivatives trading losses in excess of US $5.25 million because of ADM’s alleged manipulative activity.

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