• NOTICE OF DISCIPLINARY ACTION

      • #
      • COMEX 19-1180-BC
      • Effective Date
      • 20 November 2020
    • NON-MEMBER:

      BGC FINANCIAL, L.P.

      EXCHANGE RULE:

      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 FOR GLOBEX AND NEGOTIATED TRADES

      E. NEGOTIATED TRADES

      At the time of execution, every order received from a customer for execution pursuant to Rule 526…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.

      RULE 432. GENERAL OFFENSES

      It shall be an offense:

      W. for a Member to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange.

      CME Group RA1814-5 and RA1906-5:

      Block Trade Submission Requirements to CME Clearing (Section 7 In Part)

      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.

      FINDINGS:

      Pursuant to an offer of settlement that BGC Financial, L.P. (“BGC”) presented at a hearing on November 18, 2020, in which BGC neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“Panel”) found that during June 2019, BGC submitted multiple block trades in Gold and Silver futures and options spreads to the Exchange with inaccurate execution times. In some of these misreporting instances, the reported execution time of the block trade was the time the spread leg prices were determined rather than the time of the trade consummation. BGC also failed to report block trades to the Exchange within the required time period following execution. On multiple occasions, BGC also improperly combined separately negotiated and executed trades on one ticket and reported the trades to the Exchange as a single block trade.

      The Panel further found that BGC did not sufficiently advise and train such staff as to relevant Exchange rules and Market Regulation Advisory Notices (“MRANs”) in order to ensure compliance with Exchange block trade reporting requirements.

      The Panel found that as a result of the foregoing, BGC violated Exchange Rules 526.F (“Block Trades”), 536.E. (“Negotiated Trades”) and 432.W. (“General Offenses – Failure to Supervise”).

      PENALTY:

      In accordance with the settlement offer, the Panel ordered BGC to pay a fine to the Exchange in the amount of $60,000.