EOX Holdings, LLC, a Commodity Futures Trading Commission-registered introducing broker, agreed to pay a fine of US $442,500 to resolve charges brought by ICE Futures U.S. that, from August 2013 through July 2014, it may have failed to adequately supervise two of its employees in connection with their execution of block trades and handling of nonpublic customer information. Two of EOX’s voice broker employees – Andrew Gizienski and Eric Torres – consented to payment of fines of US $50,000 and US $7,500, respectively, to resolve related charges.
Earlier this year, ICE Futures settled disciplinary actions against AC Power Financial Corporation and Jason Vaccaro, the firm’s president, for a combined fine of US $225,000 for Mr. Vaccaro’s alleged use of nonpublic information “received from his Introducing Broker” related to a customers’ block trades unrelated to any negotiation of a block trade between Mr. Vaccaro and such customers. It now appears the IB was EOX.
Moreover, ICE Futures, at the same time, also resolved a disciplinary action against Susquehanna Energy Partners for a fine of US $100,000 for purportedly giving a verbal standing order to an IB that resulted in block trades being allocated after the fact, as opposed to placing individual block trades, as required by the exchange’s rules. Again, it now appears the IB was EOX.
(Click here for details of these two ICE Futures disciplinary actions in the article “ICE Futures U.S. Settles Disciplinary Actions Against Three Respondents for Alleged Block Trade Violations For US $325,000 Combined Fine” in the May 14, 2017 edition of Bridging the Week.)
Separately, Korea Investments & Securities Co., LTD, agreed to pay a fine of US $65,000 to settle charges brought by the New York Mercantile Exchange that its traders, on multiple occasions from February 1 through May 31, 2016, purportedly crossed orders on Globex involving Crude Oil futures, without waiting five seconds as required under the applicable exchange rule. (Click here to access NYMEX Rule 539.C.3.a.) KIS was also charged with a failure to supervise for not educating its employees regarding exchange rules and for not ensuring that each of its employees used unique Tag 50 IDs.
A&A Trading Inc. consented to pay a fine of US $60,000 to settle a disciplinary action brought by the Chicago Mercantile Exchange that, on 12 dates between October 2015 and February 2016, its employees entered matching buy and sell orders on Globex involving Live Cattle futures in order to freshen the delivery dates of customer accounts. A&A was also charged with the failure of its employees to each use unique Tag 50 IDs.
Compliance Weeds: Training, training and more training – and make it specific! In a number of recent cases, CME Group exchanges have charged firms with failure to supervise, in part, because they did not provide their employees with training regarding applicable exchange rules.(Click here for background in the article “Two Firms Settle With CME Group Exchanges for Not Supervising Employees Who Allegedly Engaged in Disruptive Trading Practices” in the September 10, 2017 edition of Bridging the Week.) Although it is very impracticable to meaningfully train employees on the intricacies of each exchange’s rules, it appears increasingly advisable that firms at least affirmatively identify any unique prohibitions or requirements of particular venues in core compliance procedures and/or training materials, as well as generically describe applicable regulatory prohibitions and requirements (e.g., no wash trades, no spoofing). Employees should be advised how to access each trading venue's particular rules and guidances.