CPO/CTA Charged for Failing to Prevent "Disruptive" Trading

A CPO/CTA settled CFTC charges of supervisory failures that allowed "disruptive, reckless, and disorderly" employee trading practices.

In the Order, the CFTC stated that a foreign board of trade ("ICE Futures Europe") brought a disciplinary action against a broker that carried out trades in Gasoil futures calendar spreads on behalf of the CPO/CTA. ICE said that the broker’s trading activity was "disruptive, reckless, and disorderly" because of (i) the quantity and timing of the orders and (ii) deficiencies in the CPO/CTA’s pre-and post-trade systems and controls. The CFTC concluded that the CPO/CTA had violated CFTC Rule 166.3 ("Supervision") for failing to maintain a proper supervisory system that would prevent employees from engaging in disruptive trading.

To settle the charges, the CPO/CTA agreed to (i) abstain from further violating CFTC regulations, (ii) pay a civil monetary penalty of $400,000 and (iii) comply with the undertakings set forth in the Order.