Merrill Lynch agreed to settle CFTC supervision and recordkeeping charges relating to block trading.

In the Order, the CFTC alleged that Merrill, Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), a registered FCM, failed to adequately supervise employees during a CME Group investigation into whether traders on the U.S. Dollar interest rate swaps and block futures trading desk of its affiliate improperly executed futures contracts after receiving block trade inquiries from customers. During the CME investigation, the traders allegedly made misleading statements, claiming that it would be impossible to execute such trades in the available time period.

The CFTC also found that Merrill Lynch's compliance and legal teams "exercised minimal oversight over the work" of an operations support group at the firm, and "fail[ed] to stay adequately informed" throughout the process. The support group supposedly failed to report crucial information to the firm's compliance and legal teams regarding the trades at issue.

In addition to the supervision charges, Merrill Lynch was also charged with failing to have adequate procedures to maintain records of block trades.

As a result of the alleged misconduct, Merrill Lynch was charged with violations of CFTC Rules 166.3, 1.31, and 1.35, and CEA Section 4g. To settle the charges, Merrill Lynch agreed to pay $2.5 million and comply with enhanced supervision, disclosure, and audit requirements.

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