Cargill de Mexico S.A. de C.V. and two of its employees were fined US $80,000 in aggregate by CME Group for engaging in wash trades on six days between June 2013 and January 2014. CME Group alleged that, on these days, the two employees—Jesus Avila and Jose Gamboa—traded agricultural products involving opposite positions in the same delivery month when they “reasonably should have known” that the orders would trade against each other on Globex. The purpose of these transactions was to transfer positions from one account to another with the same beneficial order, wrote the CME Group in its notices of disciplinary action related to this matter. The respondents settled this matter without admitting or denying any rule violations. The individual respondents also agreed to a five-day CME Group trading prohibition as part of their sanctions, while Cargill was additionally charged with failure to supervise. In a separate case, Port 22 LLC consented to pay a fine of US $55,000 for engaging in a pattern of trading between June 8, 2013, and June 11, 2014, whereby the firm did not correct a software bug that caused misleading bids and offers to be sent to the market. According to CME Group, during this time, Port 22’s automated trading system entered price modifications in Eurodollar futures spread instruments that incrementally widened bids and offers. Port 22 noticed this problem while first testing its ATS, but failed to take adequate steps to remedy it, and then failed to fix the problem for eight months after it was first notified by the exchange of the issue. CME Group charged the firm with engaging in acts “detrimental to the interest or welfare of the Exchange,” and for failure to supervise.
Compliance Weeds: Transfers of positions from one account to another with the identical beneficial ownership should be accomplished applying exchange rules related to transfers of trades not through pre-arranged trades. (Click here to access CME Group Rule 853.A.1.i)