CFTC Orders Interdealer Brokers to Pay $25M for Fraud in FX Options Markets
The U.S. Commodity Futures Trading Commission (CFTC) recently issued orders filing and settling charges against two interdealer brokers, BGC Financial, LP and GFI Securities, LLC.
According to the orders, BGC’s and GFI’s brokers in their respective emerging-markets foreign-exchange-options (EFX options) departments posted fake trades to induce clients to trade in EFX options. The firms paid a total of $25 million in civil penalties for their alleged misconduct.
Specifically, the CFTC found that BGC and GFI brokers posted bids and offers on their EFX options electronic platform even though no such bids and offers at the posted levels had been made. Brokers refer to this practice as “flying.” The CFTC also found that BGC and GFI brokers communicated fake trades to clients. Brokers refer to this practice as “printing” a trade.
According to the CFTC, when a “flown” bid or offer was hit on the platform, the screen would flash, falsely reflecting that a transaction had occurred. This may have deceived clients into believing an actual trade had been made.
The CFTC alleged that the fraudulent conduct of “flying prices” and “printing trades” created the appearance of greater liquidity and tighter spreads in EFX options, causing clients to trade in EFX options on the platforms at times and prices based on false information.
The respective orders require BGC to pay $15 million and GFI to pay $10 million in penalties. They also obligate the companies to strengthen their internal protocols.
If you have been a victim of fraudulent trading practices – whether committed by BGC, GFI, or other interdealer brokers – please contact the Business Trial Group. Attorneys Jared Levy (561-812-1541) and Aiman Farooq (954-327-3041) will be happy to discuss your potential claims, relating to your investment losses.
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