FxWirePro: US-CFTC Charges BGC Financial and GFI Securities LLC For Misrepresenting in Options Trades

Recently, the US-CFTC slammed Pennsylvanian individual for fraudulent bitcoin scheme by alleging Jon Barry Thompson who is Pennsylvania-based individual for inducing two customers to send roughly $7 million to fund the purchase of bitcoin with misrepresentations that he or the company had the bitcoin in hand and the customers’ money would be safeguarded.

For now, the U.S. Commodity Futures Trading Commission (CFTC) orders interdealer brokers to pay $25 million for fraud in FX options markets.

In a press release to EconoTimes, CFTC announced today that it issued orders filing and settling charges against two interdealer brokers: BGC Financial, LP and GFI Securities, LLC.

The orders find that brokers employed by BGC and GFI on their respective emerging markets foreign exchange options (EFX options) desks made false representations that certain bids and offers were executable and that certain trades had occurred.  The orders were entered on Monday, September 30, 2019.

The respective orders require BGC to pay a civil monetary penalty of $15 million and GFI to pay a civil monetary penalty of $10 million. They also require each of the companies to strengthen their internal controls and procedures, to provide for the appointment of a monitor, and to cease and desist from violating the Commodity Exchange Act and CFTC regulations, as charged.

CFTC Director of Enforcement James McDonald said that “Brokers and other intermediaries play a critical role in our markets. The CFTC is committed to protecting the integrity of our markets by ensuring they are held accountable for fraudulent misconduct.”

The respective orders find that BGC and GFI brokers posted bids and offers on their company’s electronic platform for EFX options when, in fact, no trading institution had bid or offered the option at that level—a practice referred to by the brokers as “flying.” The orders further find that BGC and GFI brokers communicated fake trades to their respective clients—a practice they referred to as “printing” a trade.  In addition, when a “flown” bid or offer was hit or lifted on the platform, the screen would flash, indicating that a trade had occurred when, in fact, it had not—thereby potentially deceiving all clients using the screen into believing an actual trade had occurred.

By “flying prices” and “printing trades,” BGC and GFI brokers intended to create an illusion of greater liquidity and, in some circumstances, tighter spreads in EFX options on the platform and induce clients to transact in EFX options via the platform at times and prices at which they otherwise might not have. Source: CFTC