The US Commodity Futures Trading Commission (CFTC) has fined BGC Financial and GFI Securities a combined total of $25 million for making false representations regarding the execution of FX options contracts
The CFTC says that BGC was engaged in this fraudulent activity between January 2014 to at least December 2015 and that GFI was between July 2013 and at least December 2015.
It’s worth noting that BGC Partners acquired GFI Group in January 2016.
The respective orders find that the brokers at BGC and GFI posted bids and offers on their company’s electronic platform for e-FX options when, in fact, no trading institution had bid or offered the option at that level – a practice referred to by the brokers as “flying”.
The orders further find that BGC and GFI brokers communicated fake trades to their respective clients – a practice they referred to as “printing” a trade. When a “flown” bid or offer was hit or lifted on the platform, the screen would flash, indicating that a trade had occurred when, in fact, it had not, thereby potentially deceiving all clients using the screen into believing an actual trade had occurred.
The CFTC says that by “flying prices” and “printing trades” BGC and GFI brokers intended to create an illusion of greater liquidity and, in some circumstances, tighter spreads in e-FX options on the platform and induce clients to transact in e-FX options via the platform at times and prices at which they otherwise might not have.
As a result, the Commission is requiring BGC to pay a civil monetary penalty of $15 million and GFI to pay a civil monetary penalty of $10 million. Each company is also required to strengthen their internal controls and procedures, to provide for the appointment of a monitor, and to cease and desist from violating the Commodity Exchange Act and CFTC regulations, as charged.
“Brokers and other intermediaries play a critical role in our markets. The CFTC is committed to protecting the integrity of our markets by ensuring they are held accountable for fraudulent misconduct,” says CFTC director of enforcement, James McDonald.