Unique twist on wash trades - CME fines another exchange for facilitating wash trades for its customer accounts
CME fined the Mercantile Exchange of Vietnam for enabling customer wash trade s - the notice is here. The exchange was fined for "acting as an intermediary for its customers who cannot access a foreign exchange directly, executed transactions in various Agriculture futures products between two accounts with common beneficial ownership. MXVC executed the opposing buy and sell orders with the knowledge and intent that the orders would trade opposite one another." So, the exchange was entering and executing orders for its customers in CME products and the CME discerned the activity.
The CME also fined two individuals for their participation in the activities, one for placing the orders as well as the ubiquitous "Tag50: violation, the other for placing the orders. Their notices are here and here. The traders were fined $10,000 each. The trader with the Tag50 violation was suspended from the CME for two weeks, the other trader for one week. The exchange was fined $30,000.
The interesting pieces of this set of facts if the CME cites trades on a single day as the underlying issue. So, the CME surveillance is adequate to review all the trades on a single day, including trades entered by another exchange, and trace them back to the accounts behind the exchange and find:
1. Wash trades between accounts held by a beneficial owner;
2. The Tag50 violation by an individual trader for those transactions;
3. Make a case the Disciplinary Committee upheld.
And the exchange was also found to have not provided compliance training for its staff as required.
Again, think of the quality of surveillance to find this needle in a haystack - do you really think you "are too small for them to worry about"?