Two nonmembers were fined by CME Group exchanges for failure to supervise employees and agents. In one disciplinary action, Enterprise Products Partners, LP, agreed to pay a fine of US $100,000 to the New York Mercantile Exchange, as a result of its employees entering into multiple wash trades between March and December 2016 in crude oil, heating oil, natural gas, and RBOB futures contracts. The NYMEX business conduct committee said the firm never provided its employees instruction or guidance related to the exchange-prohibition against wash trades. Moreover, the NYMEX BCC said that, during the relevant time, Enterprise failed to ensure its employees used unique user Tag 50 identification codes to access Globex. Separately, Zerich Securities Limited consented to remit a fine of US $75,000 collectively to both NYMEX and the Commodity Exchange, Inc., for the failure of one of its agents to trade in natural gas futures contracts without proper written authorization. According to the NYMEX and Comex BCCs, Zerich’s agents also backdated authorization forms and altered information on account opening documents.
Compliance Weeds: In October 2016, two CME Group exchanges brought and settled disciplinary actions against a trading company and two of its employees for engaging in alleged spoofing-type activities on NYMEX and Comex. To resolve the matter, the trading firm agreed to disgorge profits of US $91,241. For the actions of its two traders, the trading firm was charged by the CME Group exchanges with violating just and equitable principles of trades and related violations, but solely on a strict liability basis. The firm was not charged with failure to supervise, and it was not assessed a fine. The CME Group exchanges implied that no fine was assessed because the firm had and enforced robust policies and procedures regarding the purported wrongful conduct of its employees. (Click here for background in the article “CME Group Settles With Trading Firm for Spoofing-Type Offenses, Holding It Strictly Liable for Acts of Agents; Orders Disgorgement of Profits” in the October 9, 2016 edition of Bridging the Week.)