FREIGHT INVESTOR SERVICES LTD.
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.
RULE 526. BLOCK TRADES
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 536. RECORDKEEPING REQUIREMENTS (IN PART)
E. Negotiated Trades. At the time of execution, every order received from a customer for execution pursuant to Rule 526 (“Block Trades”) and Rule 538 (“Exchange for Related Positions”) must be in the form of a written or electronic record and include an electronic timestamp reflecting the date and time such order was received, and must identify the specific account(s) for which the order was placed. Such record shall also include an electronic timestamp reflecting the date and time such order was modified, returned, confirmed or cancelled.
Pursuant to an offer of settlement that Freight Investor Services Ltd. (“FIS”) presented at a hearing on April 29, 2020, in which FIS neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the NYMEX Business Conduct Committee (“Panel”) found that, between September 2018 and November 2018, as well as during February 2019 and between June 2019 and July 2019, FIS executed numerous block trades for customers in various NYMEX Energy futures contracts that FIS failed to report to the Exchange within the required time period following execution, as well as failed to report accurate trade details for these block trades to the Exchange. The Panel also found that, during these time frames, FIS failed to properly advise its employees as to relevant Exchange rules and Market Regulatory Advisory Notices (“MRANs”), as well as failed to supervise the execution of block trades by its employees to make certain that brokers complied with Exchange block trade reporting requirements. The Panel further found that, during these time frames, FIS also failed to maintain complete written or electronic records of all such transactions consummated via its brokers.
The Panel concluded that FIS violated Exchange Rules 432.W. (General Offenses – Failure to Supervise), 526.F. (“Block Trades”), and 536.E. (Recordkeeping Requirements).
In accordance with the settlement offer, the Panel ordered FIS to pay a fine to the Exchange in the amount of $85,000.