CME Group today posted a notice of disciplinary action against Tradition Securities & Derivatives LLC. The company has proposed an offer of settlement in which it neither admitted nor denied the alleged CME Rule violations.
The rules that Tradition allegedly violated are the following:
- RULE 526. BLOCK TRADES (in part)
The Exchange shall designate the products in which block trades shall be permitted and determine the minimum quantity thresholds for such transactions. The following shall govern block trades:
F. Unless otherwise agreed to by the principal counterparties to the block trade, the seller, or, in the case of a brokered transaction, the broker handling the block trade, must ensure that each block trade is reported to the Exchange within the time period and in the manner specified by the Exchange. The report must include the contract, contract month, price, quantity of the transaction, the respective clearing members, the time of execution, and, for options, strike price, put or call and expiration month. The Exchange shall promptly publish such information separately from the reports of transactions in the regular market.
- RULE 432. GENERAL OFFENSES (in part)
It shall be an offense:
W. for any party to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange.
CME GROUP MARKET REGULATION ADVISORY NOTICE RA1806-5 (in part):
Block Trade Submission Requirements to CME Clearing
Please note that the execution time of a block trade is the time that the parties agree to the trade. Market Participants must accurately report the execution time of the block trade. The reporting of inaccurate execution times may result in disciplinary action.
A Panel of the COMEX Business Conduct Committee found that between December 2019, and October 2020, Tradition submitted multiple block trades to the Exchange in Gold Futures and Options with inaccurate execution times and failed to report block trades to the Exchange within the required time period following execution.
Additionally, the Panel found that Tradition failed to properly advise and train its employees as to relevant Exchange Rules and Market Regulation Advisory Notices (“MRANs”) in a manner sufficient to ensure compliance with the same.
The Panel found that as a result of the foregoing, Tradition violated COMEX Rules 526.F. and 432.W.
In accordance with the settlement offer, the Panel ordered Tradition to pay a fine to the Exchange in the amount of $50,000.