StoneX to pay $425,000 to settle ICE charges
ICE Futures U.S. has published a disciplinary notice as to StoneX Financial Inc and StoneX Markets LLC.
On July 20, 2022, a subcommittee of the Exchange’s Business Conduct Committee (BCC) determined that StoneX Financial Inc. (SX Financial) and StoneX Markets LLC (SX Markets) may have violated Exchange Rule 4.04 in multiple instances between May 2020 and May 2021 by engaging in improper pre-hedging.
In each instance, SX Financial, acting in a broker/agency capacity, received an order from a customer and then sought to fill the customer order opposite the proprietary trading desk of its affiliate, SX Markets. However, prior to consummating each block trade opposite SX Financial’s customer, traders at SX Markets solicited and/or executed a trade to pre-hedge the risk from the impending block trade that SX Markets would execute opposite SX Financial’s customer.
SX Financial and SX Markets were able to realize profits in the amount of $225,606.80 by engaging in this activity.
In addition, the BCC found that SX Financial and SX Markets may have separately violated Exchange Rule 4.04 by adopting a risk policy that may have motivated their employees to engage in the improper pre-hedging activity noted above for certain contracts.
The BCC also found that SX Financial and SX Markets may have violated Exchange Rule 4.01(a) by failing to diligently supervise its employee’s block trade activity and compliance with Exchange Rules.
Lastly, the BCC found that SX Markets may have violated Exchange Rule 4.07(c) by misreporting the execution time of certain block trades and submitting them beyond the 15-minute reporting window, and that SX Financial and SX Markets may have violated Exchange Rule 21.04 by failing to timely produce documents, books, or records requested by Compliance staff during the investigation of this matter.
In accordance with the terms of settlement, in which SX Financial and SX Markets neither admitted nor denied the alleged rule violations, SX Financial and SX Markets agreed to pay a collective monetary penalty of $425,000 and disgorge $225,606.80 in profits.