Washington, D.C. – The Commodity Futures Trading Commission (CFTC) has settled charges against Nasdaq Futures, Inc., formerly a designated contract market, for failing to properly disclose details of an incentive program offered to traders. The CFTC order, issued today, alleges Nasdaq Futures, Inc. did not establish adequate rules to monitor or enforce the program, nor did it fully disclose its details to the CFTC or the public as required by law.
The investigation, spanning from July 2015 to July 2018, revealed Nasdaq Futures, Inc. operated a Designated Market Maker (DMM) program that included a fixed monthly stipend. However, the company also made undisclosed payments to select DMM participants based on trading volume. This volume-based incentive was intentionally omitted from disclosures to the CFTC and public filings, with rule submissions even explicitly denying its existence.
When questioned by CFTC staff, Nasdaq Futures, Inc. employees repeatedly stated there was no volume-based component to the DMM program, despite knowing these statements were false and misleading. This lack of disclosure violated several Core Principles of the Commodity Exchange Act (CEA), which require accurate information from CFTC-designated exchanges.
Furthermore, the CFTC found Nasdaq Futures, Inc. failed to act on a recommendation from its regulatory service provider to investigate trading activity among three DMM program participants and did not document its reasons for inaction – a violation of CFTC regulations.
As a result of these violations, Nasdaq Futures, Inc. will pay a $22 million civil monetary penalty. CFTC Director of Enforcement Ian McGinley emphasized the importance of accurate information from exchanges, stating the company’s conduct represented “significant violations” of its duty to provide such information.
The CFTC acknowledged assistance from the National Futures Association in the investigation. The case was led by staff members Brett Shanks, Elsie Robinson, Jeff Le Riche, Brandon Wozniak, Margaret Aisenbrey, Jordon Grimm, Christopher Reed, Charles Marvine, and former staff member Jo Mettenburg.
The CFTC encourages individuals with information regarding potential violations of commodity trading laws to report it via the toll-free hotline 866-FON-CFTC, online tip submission, or direct contact with the Division of Enforcement.
Source: CFTC.gov
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