Washington, D.C. – Goldman Sachs & Co. LLC has been ordered to pay $3 million and cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, the Commodity Futures Trading Commission announced today. The settlement stems from charges of failing to maintain adequate supervisory systems and controls, as well as material omissions in communications with the CFTC’s Division of Enforcement (DOE).
The CFTC found that Goldman’s supervisory system failed to prevent potentially disruptive trading on December 29, 2017, in the ICE Futures Europe Low Sulphur Gasoil futures contract. Specifically, the company’s Volatility Awareness Control (VAC) – designed to suspend trading when volatility exceeded certain thresholds – malfunctioned and did not operate as intended. Furthermore, post-trade surveillance, meant to detect manipulation of daily settlement prices, used an incorrect settlement period, hindering its ability to identify potentially disruptive activity.
According to the CFTC, Goldman also omitted critical information about the VAC malfunction when responding to a DOE inquiry in August 2018. The request sought details on order execution methods, including the rationale behind specific order placements and a full description of any algorithms used. Goldman failed to disclose that the VAC should have, but did not, suspend its trading algorithm on December 29, 2017. The CFTC determined this omission rendered the response materially misleading, violating Section 6(c)(2) of the CEA.
“The CFTC takes very seriously the role of registrants’ supervisory obligations to detect and prevent disruptive trading and to maintain the integrity of the futures markets,” stated Director of Enforcement Ian McGinley. “This settlement, and the significant civil monetary penalty here, also reflects the CFTC’s expectation that responses to Division inquiries be accurate and complete.”
The CFTC acknowledged the assistance of the United Kingdom Financial Conduct Authority in the investigation. The case was led by W. Derek Shakabpa, Elizabeth C. Brennan, Trevor Kokal, R. Stephen Painter, Jr., Lenel Hickson, Jr., and Manal M. Sultan of the Division of Enforcement.
Source: CFTC.gov
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