West Oaks Energy agreed to pay a fine of almost US $248,000 and disgorgement of almost $168,000 to resolve allegations by ICE Futures U.S. that it violated spot month position limits for energy contracts on three instances, violated an exemption from a position limit for arbitrage positions on four occasions and failed to supervise an employee. Separately, BNP Paribas Commodity Futures Ltd. and Jason Spaziante, a broker employed by BNP, agreed to settle allegations by IFUS that Mr. Spaziante impermissibly took advantage of information received during pre-execution communications. According to IFUS, on February 13, 2014, after communicating with an unnamed unaffiliated trader regarding the terms of a customer order, Mr. Spaziante gave the trader “the option to take a position that might have been offset against either the customer order, or, alternatively, in the central limit order book” for the relevant sugar futures contract. To resolve this matter, BNP agreed to pay a fine of US $200,000, while Mr. Spaziante agreed to a trading ban for all IFUS contracts for three months. IFUS also resolved a disciplinary action against Noble Americas Resources Corp and Noble Columbia S.A.A. for apparently engaging in exchange for physical transactions against each other when their accounts were not independently controlled, and for not having documentation to support the physical component of EFPs on “multiple occasions.” The companies each agreed to pay a US $62,500 fine to resolve this matter. Finally, Spectron Energy Services Ltd. was charged by IFUS with failing to report one block trade within a required time frame and for misreporting the execution times of “several” block trades. Spectron agreed to pay a fine of $22,000 to settle this action.
Compliance Weeds: As at the CME Group and other exchanges, ICE Futures U.S. has strict rules governing the execution and reporting of block trades. These requirements address the qualified participants eligible to execute block trades, minimum thresholds, prices, reporting requirements and other limitations (click here to access IFUS Rule 4.07). Moreover, “[p]arties involved in the solicitation or negotiation of a block trade may not disclose the terms of a block trade to non-involved parties prior to the block trade being publicly reported by the Exchange” or take advantage of non-public information for their own advantage. (Click here to access ICE Futures U.S. Block Trades – FAQs (June 19, 2015).) Block traders must follow precisely these requirements not only to avoid potential violations of IFUS’s requirements, but the CFTC requirement that approved non-competitive transactions (including block trades) must be executed in accordance with exchange rules. (Click here to access background on the CME Group’s block trade rules in the article “CME Group Files Disciplinary Actions for Trading Ahead of Block Trades and Failure to Supervise an Employee Engaging in Disruptive Trading Activities” in the August 23, 2015 edition of Bridging the Week.)