CME Group Inc, the largest US futures exchange operator, has fined New York-based interdealer broker GFI Securities LLC $75,000 for a series of lapses in supervision, reporting, and recordkeeping spanning over four months.
CME, owner of the Chicago Mercantile Exchange and New York Mercantile Exchange and others, took action against GFI Securities for reporting inaccurate execution times on multiple block trades.
More specifically, the exchange investigation found that GFI failed to report executed block trades involving various COMEX Gold futures contracts in a timely manner. Between January 2020, and April 2020, GFI also failed to properly supervise its employees over the execution of block trades to ensure compliance with the exchange’s block trade reporting requirements.
As explained by CME, these controls should be built into business processes, supported by real-time alerts and monitoring system.
“The Panel concluded that GFI violated Exchange Rules 432.W. (General Offenses – Failure to Supervise), 526 (“Block Trades”), 526.F. (“Block Trades”) and Market Regulation Advisory Notice (“MRAN”) RA2002-5 (“Block Trade Submission”). In accordance with the settlement offer, the Panel ordered GFI to pay a fine to the Exchange in the amount of $75,000,” the GME notice reads.
The settlement, in which GFI neither admitted nor denied the violations upon which the penalty is based, was announced by a self-regulatory panel within CME, which fines firms and individuals and suspends them from its markets for violations.
The penalty is the latest to be handed out in a long-running regulatory probe into GFI Securities’ practices. The settlement comes barely one year after the FINRA fined the firm $50,000 for failing to comply with SEC’s market access rules that require broker-dealers to document a system of risk management controls and supervision processes to limit financial exposure.
Prior to that, GFI Securities received several fines, including those related to its equity derivatives desk. The SEC hit the firm in 2019 with a $4.3 million penalty for disclosing customer identities to trading counterparties despite touting that it preserves their anonymity when brokering trades.
Brokers at BGC Financial and GFI Securities also paid $25 million to settle charges of fraudulent practices related to FX option trades. The CFTC said they created false trades to induce customers to indulge in foreign-exchange options at unfair prices.
