CFTC fines Advantage Futures $395,000 for 12.8 million unmonitored trades
Collectively, these failures by Advantage resulted in over 12.8 million cleared contracts not being processed or surveilled from July 2018 to June 2022. This accounts for nearly 1.5% of the trading volume by Advantage’s customers during that four-year period.
The Commodity Futures Trading Commission (CFTC) has issued an order against Advantage Futures LLC, a Chicago-based registered futures commission merchant, for failing to diligently supervise commodity interest accounts, leading to inadequate surveillance of customers’ trading activity for disruptive trading over four years.
The CFTC has filed and simultaneously settled charges against the firm for its failure to diligently supervise the handling of commodity interest accounts. This lapse resulted in incomplete and inadequate oversight of its surveillance of customers’ trading activities, thus violating CFTC regulations.
Total of 4 years with surveillance irregularities
In response to these charges, Advantage Futures LLC is required to pay a civil monetary penalty of $395,000. The order also mandates the firm to cease and desist from any further violations of its supervisory obligations, as outlined in the charges.
The CFTC’s order sheds light on the firm’s policies and procedures, which stipulated that customer trades cleared by Advantage would undergo surveillance for disorderly trading using complex trade analysis software.
However, during the relevant period, the firm failed to fully adhere to its own policies and procedures. It also failed to process and surveil three distinct sets of customer order and execution data over three separate periods.
One significant lapse occurred as a result of Advantage’s surveillance vendor’s failure to process data for one exchange’s futures contracts between July 2018 and December 2020.
The vendor ceased one of the data feeds after testing and transitioning to live surveillance. Advantage, however, did not ensure that its vendor continued to receive and process all customer trade data, leading to nearly two and a half years of unmonitored trading activity for certain customers’ products.
The order also reveals that Advantage’s surveillance vendor did not receive data from another exchange between June 2019 and June 2022. This lapse stemmed from Advantage’s transition to a new clearing broker in June 2019, during which the firm failed to switch the data feed connections from its previous clearing broker to the new one.
Furthermore, the order highlights that Advantage failed to provide its surveillance vendor with the order and trade data for some of its customers’ total trading on two additional exchanges between July 2018 and June 2022.
1.5% of the trading volume by Advantage’s customers
Collectively, these failures by Advantage resulted in over 12.8 million cleared contracts not being processed or surveilled from July 2018 to June 2022. This accounts for nearly 1.5% of the trading volume by Advantage’s customers during that four-year period.
Advantage has conveyed its commitment to addressing these shortcomings and preventing their recurrence.
The firm has taken several measures, including retaining a new surveillance vendor, reprocessing and reviewing data that was not initially reviewed in real-time, hiring additional staff with a focus on trade surveillance, and implementing controls to ensure consistent connectivity to exchange data feeds.
