Interdealer broker to pay $7 Million
The Commodity Futures Trading Commission announced the U.S. District Court for the Southern District of New York entered a consent order against defendants TFS-ICAP LLC and TFS-ICAP Ltd., interdealer brokers located in New York and London, requiring them to pay a $7 million civil monetary penalty for representing to clients bids and offers that had not been made, and for communicating to clients trades that had not occurred. In the order, TFS-ICAP admits that its employees engaged in the misconduct, known as “flying” prices and “printing” trades, that violated the Commodity Exchange Act (CEA), as charged.
The order also finds that TFS-ICAP, its former CEO Ian Dibb, and its former Emerging Markets desks head Jeremy Woolfenden failed to supervise diligently TFS-ICAP broker conduct. The order resolves the CFTC enforcement action filed on September 28, 2018. [See CFTC Press Release No. 7816-18] Defendants Dibb and Woolfenden are each subject to a $500,000 civil monetary penalty for their individual supervisory failures and have both agreed to not apply for registration or claim exemptions from registration with the CFTC in any capacity, or engage in any activity requiring such registration or exemption from registration with the CFTC, for five years.
“Brokers and other intermediaries play a critical role in our markets. The CFTC will act to ensure that these entities communicate and report honest and accurate pricing information to protect the integrity of the markets,” said CFTC Acting Director of Enforcement Vince McGonagle. “We are also committed to holding corporate managers who have regulatory supervisory responsibilities accountable to ensure policies and procedures are in place that would have prohibited, and could have deterred, unlawful conduct from occurring.”
The order finds that between January 2014 and August 2015, TFS-ICAP brokers represented to U.S.-based bank clients that there were bids or offers for an FX option at a particular level when, in fact, no trading institution had bid or offered the option at that level. The order also finds that TFS-ICAP brokers on the Emerging Markets desks in both London and New York communicated to one or more U.S.-based bank clients that trades had occurred when a trade had not, in fact, occurred. In the FX options industry these practices are referred to as “flying” prices and “printing” trades. TFS-ICAP admits this conduct violated provisions of the CEA and CFTC regulations, which prohibit fraudulent and deceptive practices, and posting non-bona fide prices.
With respect to the conduct of Dibb, a CFTC registrant, the order finds that he was ultimately responsible for ensuring that TFS-ICAP broker conduct was in compliance with the law. Mr. Woolfenden, who is also a CFTC registrant, had supervisory responsibility over all TFS-ICAP brokers on the Emerging Markets desks in New York and London. Both Dibb and Woolfenden were responsible for maintaining and enforcing a reasonable system of internal supervision.
The CFTC appreciates the assistance of the UK Financial Conduct Authority, which on November 23, 2020 announced sanctions against TFS-ICAP Ltd. The CFTC also appreciates the assistance of the Office of the Attorney General for the State of New York.
The Division of Enforcement staff responsible for this case are Sam Wasserman, Elizabeth May, Christopher Giglio, K. Brent Tomer, Lenel Hickson, Jr., and Manal M. Sultan.