January 14, 2019
by Katherine Cooper

The Chicago Board of Trade (“CBOT”) determined that Benn Hepworth engaged in wash trades by placing “buy and sell orders in the same product and expiration months, where he knew or reasonably should have known that the purpose of the orders was to avoid taking a bona fide market position.”  The violative conduct involved orders placed in the EU Wheat spread markets over a ten-day period in October 2016.  The CBOT ordered that Hepworth pay a fine of $50,000 and suspended him “from all direct and indirect access to any trading floor or electronic trading or clearing platform owned or operated by CME Group Inc. for a period of three years.”

The North American Derivatives Exchange (“NADEX”) fined and permanently banned Markeith Victoria for engaging in pre-arranged trading.  NADEX also found that Victoria had moved investor funds from Capstone Currency, LLC to his own, personal NADEX account to trade on NADEX.  In addition, NADEX determined that Victoria violated exchange rules by soliciting customer funds to be invested in Capstone which he operated “in a manner that would likely require registration with the CFTC” when Capstone was not so registered.  In addition to being permanently banned from trading on NADEX either for his own account or on behalf of any one else, the exchange also fined Victoria $2,500 and revoked his NADEX membership.

The exchanges and the Commodity Futures Trading Commission view non-competitive trading as threats to the integrity of derivatives trading in the United States.  These disciplinary actions serve as reminders that, in light of the regulators’ concerns, the exchanges are diligently monitoring trading activity to identify and punish traders engaging in non-competitive transactions.  Market participants – whether proprietary trading firms or brokerages providing customers with access to the exchanges – would be wise to remain vigilant to identify and stop such conduct.

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