CFTC orders Newedge USA to pay USD700,000 for submitting inaccurate large trader reports
The US Commodity Futures Trading Commission (CFTC) has entered an order requiring Newedge USA, LLC (Newedge), a New York-based futures commission merchant, to pay a USD700,000 civil monetary penalty for submitting inaccurate large trader reports to the CFTC and for violating a 7 February, 2011, CFTC order directing Newedge to improve the accuracy and timeliness of its large trader reporting.
Newedge is a subsidiary of Newedge Group, SA, a global financial services company with 21 affiliates around the world. Newedge is one of about 200 clearing members, futures commission merchants and brokers who collectively submit about 600,000 large trader position reports to the CFTC each day.
The CFTC order finds that from about March 2011 through about July 2011, Newedge’s large trader position reports submitted to the CFTC contained numerous errors. The types of errors included (1) reporting incorrect commodity codes, (2) overstating and understating positions in omnibus accounts, (3) overstating and understating large trader positions, (4) overstating and understating open interest, (5) issuing erroneous delivery notices, (6) reporting positions as net when they should be reported as gross, (7) reporting exchange of futures for physicals or cash positions and exchange of futures for swaps positions that do not exist, and (8) failing to report required positions. These errors and resulting inaccurate large trader reports also violated the 7 February, 2011, Commission order.
CFTC Enforcement Director David Meister says: “The Commission relies on large trader reports for many important Commission functions, such as monitoring compliance with speculative limit rules and assessing individual traders’ activities and their potential market power and risk in various commodity and swaps interests. Today’s action should send a message to the industry that the Commission expects its reporting rules to be strictly adhered to, and that the Commission will sanction those who fail to adhere to prior Commission orders.”
In addition to imposing a civil monetary penalty, the CFTC’s order requires Newedge to cease and desist from violating the Commodity Exchange Act’s requirement to timely submit accurate position reports and notices, and to implement and maintain procedures to prevent and detect reporting violations of the Act and CFTC regulations.
Newedge has already begun implementing revised reporting procedures and engaged a national consulting firm to recommend improvements to its large trader reporting to the exchanges and the CFTC based on the errors cited in the 7 February, 2011, CFTC order.
CFTC staff responsible for this case are Susan Gradman, Joseph Patrick, Gary Martinaitis, Lisa Dooley, William Maldonado, William Gehrke, Scott Williamson, Rosemary Hollinger, and Richard Wagner.
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