Disclosure

CFTC charges NYMEX and former employees over disclosure of customer information

The US Commodity Futures Trading Commission (CFTC) has filed an enforcement action charging the New York Mercantile Exchange (CME NYMEX) and two former employees, William Byrnes and Christopher Curtin, with violating the Commodity Exchange Act and CFTC regulations.

The CFTC complaint alleges that CME NYMEX, Byrnes and Curtin made repeated disclosures of material non-public customer information over of period of two and one-half years to an outside commodity broker who was not authorised to receive the information.
 
The CFTC’s Complaint, filed on 21 February 2013 in the US District Court for the Southern District of New York, alleges that Byrnes and Curtin worked on the CME ClearPort Facilitation Desk and were responsible for facilitating customer transactions reported for clearing through the CME ClearPort electronic system. The complaint alleges that at least from in or about February 2008 to September 2010, Byrnes knowingly and wilfully disclosed material non-public information about CME NYMEX trading and customers, including about trades cleared through CME ClearPort, to a commodity broker on at least 60 occasions. 

The complaint further alleges that between May 2008 and March 2009, Curtin knowingly and wilfully disclosed the same type of information to the same commodity broker on at least 16 additional occasions. The non-public customer information unlawfully disclosed by Byrnes and Curtin in conversations — often captured on tape — included details of recently executed trades, the identities of the parties to specific trades, the brokers involved in trades, the number of contracts traded, the prices paid, the structure of particular transactions, and the trading strategies of market participants, according to the complaint.
 
The complaint alleges that the CME NYMEX and the two former employees violated the Commodity Exchange Act and CFTC regulations, which specifically prohibit the disclosures of this type of customer information.
 
The CFTC’s complaint also alleges that in July 2009, a market participant complained to CME NYMEX that the participant believed non-public information about trades cleared through CME ClearPort had been disclosed by a CME NYMEX employee named “Billy.”  Although a CME NYMEX managing director who investigated the market participant’s complaint identified “Billy” to be William Byrnes, CME NYMEX did not then question Byrnes, and Byrnes’s illegal disclosures continued for over a year, until at least September 2010. Ultimately, CME NYMEX terminated Byrnes’s employment in December 2010 after yet another market participant complained to CME NYMEX about disclosures of non-public customer information. Curtin had previously left CME NYMEX voluntarily.
 
In its continuing litigation, the CFTC seeks civil monetary penalties, trading and registration bans, and a permanent injunction prohibiting further violations of the federal commodities laws, as charged.

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