The U.S. Commodity Futures Trading Commission (CFTC) has charged a division of CME Group Inc. Inc. and two former employees with disclosing customer trading information to an outside commodity broker.
The CFTC’s complaint, filed in the U.S. District Court for the Southern District of New York, alleges that two former employees of CME’s New York Mercantile Exchange energy division,William ByrnesandChristopher Curtin, who were responsible for facilitating customer transactions reported for clearing through the CME ClearPort electronic system, disclosed material nonpublic customer information about CME NYMEX trading and customers to an unnamed commodity broker. The allegations have not been proven.
“The nonpublic customer information unlawfully disclosed by Byrnes and Curtin in conversations — often captured on tape — included details of recently executed trades, the identities of the parties to specific trades, the brokers involved in trades, the number of contracts traded, the prices paid, the structure of particular transactions, and the trading strategies of market participants,” it says in its complaint.
The CFTC is seeking civil monetary penalties, trading and registration bans, and a permanent injunction prohibiting further violations.
CME Group said that it intends to oppose the CFTC action. “We believe the complaint against NYMEX is neither justified as a matter of law nor consistent with the regulatory structure,” it notes. “For these reasons, we have determined that we must oppose this case in court because we simply do not believe the CFTC’s claims in this case are fair to NYMEX. We are confident that the company will prevail on these claims.”
The exchange says that when it learned of instances of employees providing information to unauthorized third parties it immediately terminated the employees and reported that misconduct to the CFTC. “Although the information disclosed was not and could not have been used to engage in insider trading or to otherwise affect the market in any way, nor did any customer suffer a financial loss resulting from these disclosures, we took swift action to make clear our commitment to protecting the confidentiality of any information concerning our customers,” it says, adding that it also reinforced its procedures and practices to protect against and detect such misconduct in the future.
The CME described the CFTC’s court action as “disappointing because it relates to incidents that CME Group has already addressed and handled appropriately, and involved no harm to any customer or the markets.” It says the regulator is now seeking to hold NYMEX liable for the actions of former employees, which were contrary to exchange policy and, when discovered, resulted in the immediate termination of their employment.