IVG Energy, Ltd., an introducing broker registered with the Commodity Futures Trading Commission, consented to a fine of US $40,000 for misreporting the execution times “in several instances” of block trades involving the ICE Futures U.S.’s natural gas and power contracts during an unspecified time period. IFUS also claimed that the company failed “to prepare and maintain records associated with such transactions as required by the exchange” —although there was no indication what the records might be. In settling this matter, IVG did not admit or deny any rule violations.
Compliance Weeds: Introducing brokers may be surprised to learn that, as is the case under rules of the Commodity Futures Trading Commission, they may also have an obligation to maintain oral records of communication in connection with transactions executed on ICE Futures U.S. even if they are not members. Among the rules that IFUS claimed that IVG violated included its rule 6.07(b) (click here to access ICE Futures U.S.’s rules). This rule requires expressly that all IFUS members and non-member CFTC-registered future commission merchants and IBs “record and maintain all oral and written communications provided or received concerning quotes, solicitations, bids, offers, instructions, trading and prices that lead to the execution of a transaction involving [e]xchange futures or options [c]ontracts and related [c]ash [c]ommodity or forward transactions, whether communicated by telephone, voicemail, facsimile, instant messaging, chat rooms, electronic mail, mobile device, or other digital media.” As under the applicable CFTC rule (1.35(a); click here to access) IFUS’s requirement to record oral communications does not apply to IBs that, during the prior three years, generated less than US $5 million in aggregate gross revenues. CME Group has a similar rule that applies on its face solely to member and member firms (Rule 536H, cross-referencing CFTC rule 1.35(a); click here to access CME rules).