CME Settles Lawsuit With Regulator Over Leaks by Former Employees -- Update
By Alexander Osipovich
Futures-exchange operator CME Group Inc. has agreed to pay a
fine of up to $4 million to settle a long-running lawsuit with its
regulator over accusations that former exchange employees leaked
confidential trading information.
The Commodity Futures Trading Commission brought the case in
2013 against a CME unit, the New York Mercantile Exchange, and two
former employees of the unit, known as Nymex. The CFTC accused the
former employees of disclosing private information on client
activities to a commodities broker in return for meals and
entertainment. The regulator later added the broker as a target of
its civil lawsuit.
Nymex and the two former employees, William Byrnes and
Christopher Curtin, agreed to pay a $4 million fine as part of the
settlement. Judge Vernon Broderick of the Southern District of New
York approved the settlement on Monday, in an order that was made
Under the settlement, Mr. Byrnes's contribution to the fine is
capped at $300,000 and Mr. Curtin's is capped at $200,000, meaning
CME must pay at least $3.5 million to the CFTC and could
potentially pay up to $4 million. Chicago-based CME acquired Nymex,
a marketplace for oil and natural gas futures and options, in
Nymex and Messrs. Byrnes and Curtin neither admitted nor denied
the CFTC's allegations. The two former Nymex employees agreed to
lifetime bans from futures trading as part of the settlement.
"Today's settlement sends a strong message that the CFTC will
work tirelessly to protect our market participants against unlawful
disclosures of their confidential information to ensure that the
fairness and reliability of our markets are not compromised," CFTC
enforcement director James McDonald said in a statement.
A CME spokeswoman declined to comment. A lawyer for Mr. Byrnes
said he was pleased with the resolution of the dispute. A lawyer
for Mr. Curtin didn't respond to a request for comment.
The settlement doesn't cover the CFTC's dispute with the
commodities broker who received the private information. The
broker, Ron Eibschutz, is set to face trial over the CFTC's
allegations that he unlawfully solicited the information from the
two other men. Mr. Eibschutz has denied the allegations.
Between 2008 and 2010, Messrs. Byrnes and Curtin divulged
information about the oil and gas options trades of Nymex clients
to Mr. Eibschutz, including the identities of the firms behind
specific trades, according to this week's settlement. Such
information can be useful to brokers for the purposes of drumming
up business or offering a more detailed picture of market activity
to their clients. It is normally closely guarded by exchanges.
Nymex fired Mr. Byrnes in 2010, while Mr. Curtin resigned from
his job at the exchange in 2009, the settlement said.
CME had unsuccessfully sought to have the CFTC's lawsuit thrown
out, arguing it shouldn't be held liable for the actions of the
former employees and that Nymex was harmed by their misconduct.
Judge Broderick allowed the case to go forward in 2014. In this
week's settlement, Nymex agreed that it was "vicariously liable"
for their violations.
The case was an unusual clash between the U.S. futures regulator
and an exchange that it regulates. Normally the CFTC works with CME
to oversee trading in futures and options markets.
CME is one of the world's largest exchange groups, offering
futures and options contracts on markets ranging from energy to
metals to interest rates.
Write to Alexander Osipovich at
(END) Dow Jones Newswires
August 04, 2020 17:23 ET (21:23 GMT)
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