The Australian Securities & Investment Commission fined BGC Partners (Australia) Pty Limited Aus $90,000 (approximately US $69,000) for failure to exercise pre-negotiated trades on behalf of a client in accordance with regulatory requirements. In Australia, when a market participant seeks to engage in a pre-negotiated trade on behalf of a client, it must have the client’s general or specific authority in writing, and it must make an enquiry through an electronic message for one side of the trade, wait 3o seconds, and then enter a matching order reflecting the pre-negotiated agreement. According to ASIC, on at least six occasions in 2016, BGC did not place only one side of a negotiated trade into the market place and then wait 30 seconds before placing the other side and/or failed to obtain a client’s authorization prior to engaging in a pre-negotiated transaction on its behalf.
Compliance Weeds: This enforcement action may have taken place on a continent far far away; however, on this continent noncompetitive trades are prohibited by Commodity Futures Trading Commission rule, unless executed in accordance with exchange rules it has approved. (Click here to access CFTC Rule 1.38.) Exchanges generally have rules permitting the simultaneous placement of opposite orders for different beneficial owners by a party with discretion over both accounts as well as by different parties that my engage in pre-execution communications. (Clickhere to access CME Group Rules 533 and 539.) These rules can be quite complex, however, and are not one-size-fits-all. Traders should ensure they understand the nuances of these provisions.