The Commodity Futures Trading Commission (CFTC) has imposed
a $22 million fine on Nasdaq Futures, Inc., formerly a designated contract
market (DCM), for significant regulatory breaches involving its incentive
programs.
According to a statement by the commission, from July 2015
to July 2018, Nasdaq Futures operated as a DCM focusing on energy futures
contracts. During this period, the firm implemented an incentive program known
as the DMM program.
Volume-based Payments
While Nasdaq Futures publicly reported a fixed stipend for
market makers, it failed to disclose a volume-based component that influenced
payments to select participants. This component was never revealed to the CFTC
or the public, as required by the Commodity Exchange Act and CFTC regulations.
The CFTC’s investigation uncovered that Nasdaq Futures not
only omitted crucial details about the volume-based payments but also provided
false information when questioned. Company representatives denied the existence
of the volume-based component despite clear evidence of its role in the
incentive program.
This misrepresentation reportedly violated the CEA’s core principles
for DCMs, which mandate accurate disclosure and adherence to regulatory
requirements.
Commenting on the enforcement action, CFTC‘s Director of
Enforcement Ian McGinley said: “The CFTC’s oversight regime depends upon
CFTC-designated exchanges providing the CFTC and market participants accurate
information. Nasdaq Futures, Inc.’s conduct here represents significant
violations of its duty to provide such information and several statutory Core
Principles applicable to CFTC-designated exchanges.”
Alleged Non-Compliance with CFTC Regulations
Further compounding the issue, Nasdaq Futures ignored
recommendations from its regulatory service provider to address specific
trading activities and failed to document these decisions. This non-compliance
with CFTC regulations contributed to the overall penalty imposed.
In a separate incident, the CFTC secured a $12.7 billion judgment against FTX and Alameda Research. According to the regulator, these
funds will reportedly be used to compensate the victims of fraudulent
activities in the bankrupt crypto exchange.
This ruling by the US District Court for the Southern
District of New York marked the largest financial recovery in the CFTC’s
history. The order requires FTX to pay $12.7 billion in monetary relief, which
includes $8.7 billion in restitution to customers and $4 billion in
disgorgement.
The judgment highlighted the seriousness of FTX’s actions, where
customer funds, including digital assets like Bitcoin and Ether, were
commingled and misappropriated.
This article was written by Jared Kirui at www.financemagnates.com.
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