This week's example of "what not to do and how not to do it" comes courtesy of the ICE US Futures Market Regulation disciplinary notices. The story is set forth in ICE notices here (employee) and here (company). The facts are pretty simple:
1. Broker employee screws up customer trades (entered spread trades backwards) as orders and gets filled;
2. Employee panics and tries to reverse trades by doing them as block trades without customer permission or knowledge,
3. Employee does not file block trade documentation
Ok, it seems like a broken record that you have to do block trades according to the rules. It also seems obvious a broker's employees have to know the block trade rules. Well, doesn't seem so in this case. Anyone who has been through training on this would know that you can't get away with block trades without the exchange figuring it out - and, by the way, the employee allocated the trades to push the loss to the customer accounts. Pretty sordid all the way around.
The employee got hit with a $20K fine and a two week suspension form the market for violating Block Trade, improper handling of customer accounts, and "conduct detrimental" charges.
The company got hit with a $30K fine for all the same charges and the normal "failure to supervise" charge - and also paid over $11K in restitution to the customers.
Once again, the company pays more than the employee for the employee's mistake. But the company should have caught the failure to report a block trade and by " failing to properly instruct employees on applicable Exchange Rules."
It frequently comes down to training in these instances. DCM has provided multiple training sessions to firms located outside the US on nit just the content but the culture and reach of US oversight on futures. It is all to frequent when the staff being trained as things like "US exchanges can do that?". Just because you have a good knowledge of your local or regional exchange and regulatory rules and culture, do not assume the US markets are the same. They are not.
DCM doesn't presume to train people on EU rules, get US training from EU based sources has the same danger.