ICE fines Marex for trade practice violations
ICE Futures U.S. has published a disciplinary notice regarding settlement of charges against Marex North America LLC.
A subcommittee of the Exchange’s Business Conduct Committee (BCC) found that on June 5, 2019, Marex may have violated Rule 4.02(l)(1)(D) when its brokers entered and executed large stop-limit orders in the Coffee C futures market on behalf of customers with reckless disregard for the adverse impact of such orders. Specifically, Marex placed these large stop-limit orders without adequate consideration of the depth in the orderbook, which caused disruptive price movements in the market.
For example, in one instance, Marex entered multiple large stop-limit orders that totaled 4,900 lots when the typical orderbook depth in this market only reflected a small fraction of that volume available. Upon election of these orders, some of them partly traded moving the market multiple prices within the same millisecond while the remaining unfilled volume rested in the market causing a significant orderbook imbalance that may have aided in the continued rapid price movement of the market.
Let’s note that, in relevant part, Rule 4.02(l)(1)(D) states:
“Trade Practice Violations
In connection with the placement of any order or execution of any Transaction, it shall be a violation of the Rules for any Person to engage in any other manipulative or disruptive trading practices prohibited by the Act or by the Commission pursuant to Commission regulation, including, but not limited to entering an order or market message, or cause an order or market message to be entered, with reckless disregard for the adverse impact of the order or market message”.
The BCC further found that Marex may have additionally violated Rule 4.01(a) by failing to properly train and supervise its brokers on disruptive trading practices and order entry considerations.
Rule 4.01(a) says:
“Duty to Supervise
Every Person shall diligently supervise the Exchange-related activities of such Person’s employees and agents. For purposes of this Rule, the term “agent” includes any Exchange-related activities associated with automated trading systems that generate, submit and/or cancel messages without human intervention. Every Person shall also be responsible for the acts and omissions of such employees and agents.”
In accordance with the terms of settlement, in which Marex neither admitted nor denied the alleged rule violations, Marex agreed to pay a monetary penalty of $25,000.
The effective date of the notice is May 26, 2021.