United States: CME And CBOT Issue Fines And Suspensions For Trade Practice Violations

Last Updated: August 9 2019
Article by Cadwalader, Wickersham & Taft LLP

Most Read Contributor in United States, July 2019

Several traders and a futures commission merchant settled charges for separate trade practice violations.

The Chicago Mercantile Exchange ("CME") ordered trader Phil Ferguson to pay $5,000 for entering certain multiple-layered orders with the intent to cancel the orders before execution (i.e., spoofing). In addition, Mr. Ferguson's access was suspended to all CME Group trading floors and electronic trading and clearing platforms for four months.

The CME ordered trader Larry C. Johnson to pay $50,000 for prearranging the execution of transactions in S&P 500 Flex 2000 Puts in order to transfer equity between accounts. In addition, Mr. Johnson's access was suspended to all CME Group trading floors and electronic trading and clearing platforms for 10 business days.

The Chicago Board of Trade ("CBOT") ordered trader Peter James Douglass to pay $20,000 for - in effect - guaranteeing the execution of a certain order by misinforming the customer regarding the number of contracts that had been executed. In addition, Mr. Douglass's access was suspended to all CME Group trading floors and electronic trading and clearing platforms for five business days.

The CBOT ordered trader David Thompson to pay $23,000 for holding a certain net futures equivalent long position that exceeded the single- and all-months position limit by amounts ranging from 22 to 28 percent.

The CBOT ordered SG Americans Securities, LLC ("SGAS") to pay a fine of $350,000 and disgorge $9,715 for failing to supervise its employees. The CBOT found that three SGAS traders entered into separate transactions with third parties on the same side of the market as their customer before initiating the block trade placed by the customer in order to hedge the block trade subsequently executed opposite the customer. In so doing, the CME alleged that SGAS took advantage of nonpublic information pertinent to the customer's requested block trades. NYMEX ordered SG Americas Securities and trader Weifeng Wang to pay a $350,000 fine and $142,910 disgorgement of profits and a $19,000 fine, respectively, for related violations.

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