Chicago-based futures commission merchant Advantage Futures LLC will pay $395,000 to settle charges brought by the Commodity Futures Trading Commission (CFTC) for failing to adequately supervise customer trading activity. The CFTC order, issued September 20, 2023, alleges that Advantage neglected its supervisory duties over a four-year period, resulting in incomplete oversight of potential disruptive trading practices.
According to the CFTC, Advantage’s internal policies required surveillance of customer trades using specialized software to detect disorderly trading. However, between July 2018 and June 2022, the firm failed to fully implement these policies, neglecting to process and monitor data from three separate sources. This resulted in over 12.8 million cleared contracts – representing almost 1.5% of Advantage’s total trading volume – going unscrutinized.
The investigation revealed multiple lapses in data transmission. From July 2018 to December 2020, data from one exchange’s futures contracts was not processed due to a dropped data feed after initial testing. Advantage failed to verify that its surveillance vendor was receiving all necessary data. A similar issue occurred between June 2019 and June 2022, when a switch to a new clearing broker wasn’t properly reflected in data feed connections, leaving another exchange’s data unmonitored. Finally, Advantage also failed to provide its vendor with order and trade data for some customers across two additional exchanges for a period spanning July 2018 to June 2022.
As part of the settlement, Advantage Futures LLC is required to cease and desist from further violations of its supervisory requirements. The firm claims to have taken corrective actions, including hiring a new surveillance vendor, reprocessing previously unreviewed data, increasing staff dedicated to trade surveillance, and implementing improved controls to ensure consistent data feed connectivity.
The CFTC acknowledged the assistance of the Quebec Autorité des marchés financiers during the investigation. The case was led by CFTC Enforcement staff members Doug Snodgrass, Joy McCormack, Allison Passman, Scott Williamson, and Robert Howell.
The CFTC encourages the public to report potential violations of commodity trading laws through its toll-free hotline (866-FON-CFTC), online tip/complaint form, or by contacting the CFTC Whistleblower Office.
Source: CFTC.gov
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