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On February 21, 2013, the USA CFTC filed charges in the US District Court in Manhattan against NYMEX (a subsidiary of CME) and two former employees, related to the employees' unauthorized provision of material non-public information to a third party commodities broker who was not entitled to receive such information. The information related to trades processed through the CME's ClearPort system. The violations allegedly occurred from 2008 through at least 2010, in return for meals, drinks and entertainment.
[Note: 0n May 8, 2013, the CFTC filed an amended complaint in this matter also naming the third party commodities broker. The CFTC charged that this broker aided and abetted the violations by the NYMEX and its two former employees.]
Unfortunately, following customer losses in MF Global and Peregrine Futures, this is another potential blow to client confidence in the futures markets: if they cannot trust that their proprietary information will be held confidentially by an exchange, it undercuts a certain basic cornerstone expectation.
In fairness, the CME on its www site claims that when it learned of employees' breach of its confidentiality expectations, it terminated such employees and reported the matter to the CFTC. It also claims that the relevant information could not have been used for insider trading and the leaks did not cause any customer a loss.
No matter what the precise facts, however, the fact this problem could and did occur is troubling. All exchanges and clearing houses must ensure that all confidential information they handle remains precisely that: confidential information!
For more information, see:
http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfeibschutzcomplaint050813.pdf
http://investor.cmegroup.com/investor-relations/releasedetail.cfm?ReleaseID=742272
The information contained in this article is not legal advice. For legal advice, please consult with your attorney. The information in this article is derived from sources believed to be reliable as of February 23, 2013, but no representation or warranty is made regarding the accuracy of any statement. To ensure compliance with requirements imposed by U.S. Treasury Regulations, Gary DeWaal and Associates LLC informs you that any U.S. tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Gary DeWaal and Associates may represent one or more entities mentioned in this article.
Gary DeWaal is currently Special Counsel with Katten Muchin Rosenman LLP in its New York office.
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Gary DeWaal
Katten Muchin Rosenman
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News Development: CFTC Files Charges against NYMEX
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