CME Group exchanges resolved a number of disciplinary actions last week alleging violations of its rules related to block trades, exchanges for related position transactions, and position limits. In two actions, related firms that had executed block trades on the New York Mercantile Exchange for customers agreed to pay fines to resolve charges that they had not reported such block trades to customers within time frames prescribed by NYMEX. Both firms (TFS Derivatives Corp. and TFS Energy Futures LLC) were non-members of NYMEX. The firms collectively agreed to pay fines totaling US $49,500. In three actions, two members (BNP Paribas Energy G.P and CHS Inc.) and one non-member entity (Fednav International Limited) of NYMEX resolved allegations they engaged in EFRP transactions without the transfer of a related position involving NYMEX futures contracts. The three firms were fined collectively US $55,000. For a bona fide EFRP, there must be a transfer of the related position. Finally, Zhou Peng, a non-member of the Commodity Exchange, Inc., agreed to pay a fine of US $25,000 and disgorge profits of $US 250,137.50 for violating a Comex spot month position limit on two days.
Compliance Weeds: Block trade reporting rules are specific by exchange, and can vary by product and time. On CME Group block trade reporting obligations for principal transactions lie with the seller unless agreed otherwise by the parties to the transaction. For brokered transactions, the reporting obligation lies with the broker unless agreed by the principal counterparties to the trade. (Click here for details regarding the reporting of block trades on CME Group (see Item 9: “Block Trade Price Reporting Requirements”) and here for details regarding the reporting of block trades on ICE Futures U.S. (see Q&A 9: “What are the reporting requirements for block trades).)