Broker Newedge USA, a unit of French Bank Société Générale, has been fined $1.75 million for allegedly engaging in conduct that is inconsistent with just and equitable principles of trade, the CME Group said Friday in a notice of disciplinary action.
Between 2010 and 2012, Newedge employees were said to have received Comex gold and silver and Nymex platinum and palladium orders, including market and limit orders, from customers, which were executed as Exchange for Related Positions (EFRP) transactions instead of on Globex, as expected by the customers, a panel of the NYMEX Business Conduct Committee said in a statement of findings.
An EFRP consists of two discrete but related simultaneous transactions. One party to the EFRP must be the buyer of the related position and the seller of the corresponding exchange contract. The other party to the EFRP must be the seller of the related position and the buyer of the corresponding exchange contract.
“In these instances, Newedge typically entered an EFRP with a liquidity provider and then a separate EFRP with the customer at a price that included a markup. In other cases, Newedge executed the EFRP with the customer without using a liquidity provider,” the CME notice said.
“The price for the EFRP with the customers, however, was not in all instances negotiated but, rather, determined by Newedge,” it added.
The panel also alleged that there was inadequate documentation of the OTC leg of the EFRP transactions between Newedge and its customers and that in many cases the trades were not designated by Newedge on the customer account statements as EFRPs due to an operational error. For these reasons, certain of the EFRPs between Newedge and its customers were not bona fide.
According to the settlement, Newedge USA will pay the fine but is not required to admit nor deny the rule violations upon which the penalty is based.
Last May, SocGen, which also is a Category 1 ring dealer member (RDM) of the London Metal Exchange, finalised the purchase of the 50 percent of Newedge it did not already own from Credit Agricole, bringing its ownership to 100 percent.
The post CME fines Newedge USA $1.75m for alleged trading violation appeared first on The Bullion Desk.
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