CME Group and ICE Futures U.S. brought and resolved a number of disciplinary actions last week, which involved a plethora of different rules. CME settled three unrelated actions that, had the underlying facts occurred beginning September 15, would likely have been charged as violations of its new disruptive trading practices prohibition (Rule 575; click here for more information on the CME’s new rule in an article “CME Issues Amended FAQs on Effective Date of New Trade Disruption Rule in the September 15 to 19 and 22 edition of Bridging the Week). The three actions, involving John Brogran, Danny Giamalis and Anuj Singhal, all centered on trading activities that were alleged not to be intended for bona fide purposes. Each respondent was charged with violating the CME’s general prohibition against committing acts detrimental to the interest or welfare of the exchange and engaging in dishonorable or uncommercial conduct. Another respondent, Jilin Grain Group Import and Export Co., Ltd. was charged with failing to supervise traders who executed 13 wash trades for 1,360 soybean and corn futures contracts purportedly to move positions among accounts. The firm was also charged with not assigning unique identifications (so-called “Tag50 user IDs”) to each of its Globex traders. Towers Research Capital Investments, LLC likewise was sanctioned by the CME for not assigning unique identifications to separate algorithms it used, but additionally for entering an excessive number of order messages in the March 2011 corn futures contract on October 18, 2010, because of a technical issue, and unintentionally self-matching through different trading groups a number of transactions on multiple dates in December 2011. Finally, Aster Commodities DMCC was charged by CME with wash trades and prearranged transactions for not waiting the requisite time to place one party’s order, after the party and a counterparty engaged in pre-execution communications, while ADM Investor Service, Inc. was subject to multiple actions by CME for making trade adjustments to various futures contracts that resulted in an overstatement of open interest. ICAP Energy LLC settled a disciplinary proceeding with ICE Futures U.S. for submitting block trades below the applicable threshold and outside the applicable reporting period, while Merrill Lynch Commodities, Inc. was sanctioned by ICE Futures U.S. for violating spot month position limits on four days. MLC also was alleged on one occasion to have failed to supervise an employee whose violation of position limits was a repeat offense.
Compliance Weeds: Reports of exchange disciplinary actions provide an excellent source of material to include in internal training of staff as they address a diverse set of day-to-day requirements and topics relevant to a number of internal departments (for example: sales, operations, information technology). Most regulatory organizations provide the ability to receive notices of these actions automatically (for example, click here for link to subscribe to CME Group advisories, and here for the link to subscribe to ICE Futures U.S. advisories).