Washington, D.C. – Commodity brokers at BGC Financial, LP and GFI Securities, LLC have been penalized by the U.S. Commodity Futures Trading Commission (CFTC) for engaging in manipulative practices involving emerging markets foreign exchange options (EFX options). The CFTC issued orders on September 30, 2019, finding that brokers at both firms falsely represented the executability of bids and offers, and fabricated trades.
The orders require BGC Financial to pay a $15 million civil monetary penalty, while GFI Securities will pay $10 million. Both companies are mandated to enhance their internal controls, appoint a monitor, and cease violating the Commodity Exchange Act and CFTC regulations.
According to the CFTC, brokers at BGC and GFI engaged in a practice known as “flying,” posting bids and offers on their electronic platform despite lacking actual trading interest at those levels. They also “printed” fake trades, communicating false information to clients. When these “flown” bids or offers were matched on the platform, the system falsely indicated a trade had occurred, potentially deceiving all users of the screen.
The CFTC alleges that these deceptive practices – “flying prices” and “printing trades” – were intended to create the illusion of greater liquidity and tighter spreads in EFX options, encouraging clients to transact at prices they might otherwise avoid. CFTC Director of Enforcement James McDonald stated the agency is “committed to protecting the integrity of our markets by ensuring they are held accountable for fraudulent misconduct.”
In a parallel action, the Office of the Attorney General for the State of New York entered into criminal non-prosecution agreements with both BGC and GFI. These agreements assess additional monetary penalties of $7.5 million for BGC and $5 million for GFI, and also require remediation and the appointment of a monitor. The civil penalties assessed by the CFTC will be offset by the amounts paid under these agreements.
The CFTC investigation was led by Lara Turcik, Elizabeth May, Christopher Giglio, K. Brent Tomer, Lenel Hickson, Jr., and Manal M. Sultan of the Division of Enforcement.
Source: CFTC.gov
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