Glory Sky Precious Metals Limited agreed to settle charges brought by the Commodity Exchange, Inc. that, from May 1, 2015 through May 1, 2016 it entered and cancelled over 7,100 orders in the gold futures markets allegedly to test the latency within those markets. The orders were not intended to be executed, claimed a COMEX business conduct committee. COMEX also charged that multiple persons entered the problematic orders using the same Tag 50 identification, when each person should have used his/her own unique Tag 50. Glory Sky, a COMEX non-member, consented to pay a fine of US $55,000 to resolve this matter. Separately, Kolmar Americas Inc., a non-member of the New York Mercantile Exchange, Inc., settled a disciplinary action brought by the exchange against the firm for purportedly not timely completing a delivery of 70 June 2015 Central Appalachian Coal futures contracts by the last calendar day of the month. The firm agreed to pay a fine of US 40,000. Additionally, Chinaway HK Industrial Limited was assessed a fine of US $100,000 and barred from access to all CME Group exchanges for five years by a Chicago Board of Trade BCC for allegedly, through one employee, entering matching buy and sell orders for one Chinaway account for 21,434 Soybean futures contracts from January 2015 through May 2015. These trades self-matched, claimed the CBOT BCC. The CBOT BCC had presumed all facts alleged against Chinaway were true as the firm did not present a defense. A NYMEX BCC also accepted a settlement from Tae Hyung Kim to pay a fine of US 25,000 and be barred from access to any CME Group exchange for five business days for permitting his market-making and market-taking automated trading systems to run inadvertently during pre-opening periods in the E-mini Crude Oil and Natural Gas futures contracts. The market-taking orders – which were not intended to be executed – caused “flickering price quotes,” said the NYMEX BCC. None of the defendants settling disciplinary admitted or denied any rule violations.

Compliance Weeds: Testing trading software or placing trades to sense market depth or latency in live markets risks the wrath of CME Group exchanges if the testing involves the placement of orders without the intent for execution. According to CME Group, “The entering of an order(s) in a non-test product without the intent to execute a bona fide transaction, including for the purpose of verifying connectivity or checking a data feed, is not permissible.” (Click here for further information in the CME Group MRAN RA1516-5 – Disruptive Practices Prohibited, Q/A 21.) Moreover, the CME Group does not consider the execution of an order, in whole or part, as necessarily dispositive of abona fide intent to complete a trade. According to CME Group, “A variety of factors may lead to a violative order ultimately achieving an execution. Market Regulation will consider a multitude of factors in assessing whether [its Disruptive Trading rule] has been violated" (CME Group MRAN RA1516-5, Q/A 6).