CME Group has posted a notice of disciplinary action as to Singapore Commodities Group Pte. Ltd. (SCG).

Pursuant to an offer of settlement in which SCG” neither admitted nor denied the rule violation upon which the penalty is based, a Panel of the COMEX Business Conduct Committee found that during the time period of December 2018 to March 2019, while negotiating and prior to executing OTC trades with a counterparty, a trader employed by SCG hedged the OTC trades with futures trades on Globex opposite the same counterparty.

Specifically, the trader directed the counterparty to enter an order for either Gold or Silver futures at a specific quantity and price on Globex and then traded opposite the counterparty’s Globex order in less than five seconds. The SCG trader was therefore able to minimize the difference in price between his OTC trade and hedge trade, resulting in smaller hedge costs.

The Panel found that SCG failed to diligently supervise its employee to the extent it failed to provide its trader with sufficient compliance training or educational materials regarding Exchange rules and failed to supervise his trading to ensure compliance with Exchange rules regarding pre-arranged trading.

The Panel found that as a result of the foregoing, SCG violated Rule 432.W. This rule states:

“It shall be an offense:

W. For any party to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange”.

In accordance with the settlement offer, the Panel ordered SCG to pay a $30,000 fine.