The U.S. Commodity Futures Trading Commission announced a couple of settlements with a trio of Canadian firms Thursday, alleging that they engaged in some inappropriate trading in the natural gas futures markets.

The CFTC announced that it issued an order filing, and simultaneously settling, charges against Scotia Capital Inc., “for prearranging trades in the natural gas futures contract on the New York Mercantile Exchange during November and December of 2006.”And, at the same time, it also issued an order filing and settling charges against Pinemore LP and Birchmore LP, two limited partnerships based in Calgary, over allegations that they engaged “in unlawful wash sales”.

According to the order against Scotia, the firm prearranged natural gas futures trades on the NYMEX. “The trades were part of a strategy involving the purchase and sale of the same quantity of NYMEX natural gas futures contracts by one customer and the opposite sale and purchase of the same quantity of NYMEX natural gas futures contracts by the other customer,” it said.

“Prior to the trades being entered on the NYMEX, SCI employees arranged for the trades to be executed with a minimal price difference between long and short positions by seeking trades such that there was no more than a half a cent price differential between the buy and sell orders,” it said; adding that these prearranged trades, “negated market risk and price competition and constituted fictitious sales and non competitive transactions.”

The order against Pinemore and Birchmore found that the firms ordered trades that “were designed to give the appearance of submitting trades to the open market, while negating the risk incident to the market and producing a virtual financial nullity”, and, as such, “they constituted wash sales”.

As a result of the cases, the CFTC imposed a $250,000 civil monetary penalty on each of the three firms, and they were all ordered to cease and desist from future violations of the Commodity Exchange Act.