Washington D.C. – tpSEF, Inc., a registered swap execution facility, has been slapped with an $850,000 penalty by the Commodity Futures Trading Commission (CFTC) for failing to enforce a critical 15-second delay rule designed to ensure fair competition. The CFTC issued an order simultaneously filing and settling charges against the firm on Thursday.
The violation centers around CFTC regulations requiring a 15-second delay for pre-arranged or pre-negotiated trades on the SEF order book. This rule aims to prevent unfair advantages when brokers or dealers execute trades on behalf of customers, ensuring that orders aren’t crossed or that the broker doesn’t immediately take the opposite side of a customer’s order without a brief delay. tpSEF not only failed to adhere to this requirement but also neglected to enforce its own internal rule mirroring the regulation.
According to the CFTC, between October 2016 and July 2020, tpSEF allowed 301 swap transactions to proceed without the mandated 15-second delay. These transactions primarily involved brokers or dealers executing orders for two customers against each other. As a self-regulatory organization, tpSEF is responsible for overseeing conduct on its platform and enforcing its own rules, a responsibility it allegedly failed to uphold.
In addition to the $850,000 civil monetary penalty, tpSEF is required to conduct a comprehensive review of all transactions from August 2020 to the present. This review aims to identify any further instances of non-compliance with the 15-second delay rule. Furthermore, tpSEF must revise its policies and procedures to prevent future violations and submit its findings to the CFTC within 180 days.
“The CFTC’s time delay requirement is important to ensure a competitive regime on swap execution facilities, and the CFTC will act to ensure that registered entities comply with CFTC regulations and their own rules,” stated Gretchen Lowe, Acting Director of the CFTC’s Division of Enforcement.
The investigation was led by Erica Bodin, Elizabeth May, Kevin Samuel, Alan Edelman, Michael Solinsky and Rick Glaser of the Division of Enforcement staff.
Source: CFTC.gov
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