06 February 2016

CME to challenge CFTC suit over information leak

22 February 2013  |  5536 views  |  0 chicago Skyline

The Commodity Futures Trading Commission is suing CME-owned trading venue the New York Mercantile Exchange and two former employees for passing on confidential customer trading data to an outside broker.

The CFTC's complaint alleges that two CME Nymex employees who worked on the ClearPort electronic system, William Byrnes and Christopher Curtin, routinely disclosed detailed transaction reporting data on customer trades to a third party broker over a two-and-a-half year period between February 2008 and December 2010.

The suit against the CME, which acquired Nymex in August 2008, is in line with attempts by regulators to hold exchange operators responsible for the misconduct of employees.

The CME is disputing the charges,claiming that it fired the rogue employees and reported the matter to regulators as soon as it became aware of the misconduct.

"Although the information disclosed was not and could not have been used to engage in insider trading or to otherwise affect the market in any way, nor did any customer suffer a financial loss resulting from these disclosures, we took swift action to make clear our commitment to protecting the confidentiality of any information concerning our customers. We also reinforced procedures and practices to protect against and detect such misconduct in the future," states the CME. "We believe the complaint against Nymex is neither justified as a matter of law nor consistent with the regulatory structure established by the Commodity Exchange Act. For these reasons, we have determined that we must oppose this case in court. We are confident that the company will prevail on these claims."

The CFTC plans to challenge the CME's claims that it acted immediately to discipline Byrne and Curtis, alleging that the culprit's actions were identified a year prior to their termination.

It's not the first time that the CME and CFTC have locked horns over regulatory infringements, with the Chicago-based exchange operator taking the rare course of suing the watchdog in November 2012 over new swaps trading rules. The CME dropped the suit when the CFTC tweaked the provisions to accommodate its complaints.

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