UBS Securities, LLC was charged in disciplinary actions brought by the Chicago Board of Trade and the New York Mercantile Exchange with violating requirements related to block trades and recordkeeping. The firm settled these matters by paying an aggregate fine of US $120,000. Specifically, on multiple days between February 17 and October 5, 2011, and from December 5 to 17, 2012, UBS was alleged not to have reported block trades within five minutes of execution, as required. For the earlier period, UBS was also charged with not maintaining required records in connection with multiple block trade transactions. CBOT also claimed that, on January 13, 2011, UBS priced a block trade involving US Treasury Bond futures as if it was a Trade at Settlement transaction when this was not permitted, and on June 10, 2011, aggregated multiple orders to achieve a block trade minimum threshold contrary to the CBOT’s requirements. NYMEX also alleged that on two occasions in 2012, UBS misreported the time of block trades and it spread trades as outright trades in violation of NYMEX rules.

Compliance Weeds: Futures exchanges have strict rules regarding the execution and reporting of block trades as they are considered a form of non-competitive transactions. These rules typically establish the eligible parties to block trades, minimum thresholds, prohibitions on the aggregation of orders for multiple accounts (except by commodity trading advisors, investment advisors or foreign persons performing a similar role), minimum times to report executions, and prohibitions on using non-public information received about potential block trades prior to execution. Firms engaging in block trades should routinely remind their traders regarding these requirements. (Click here, for example, for NYMEX and Commodity Exchange Block Trades Question and Answers, and here for ICE Futures U.S. Block Trade – FAQs.)