CFTC fines StoneX Markets $650K for disclosure lapses
The US derivatives regulator has issued an order which simultaneously files and settles charges against StoneX Markets for violations of the CFTC’s Business Conduct Standards applicable to registered swap dealers.
StoneX was found by the CFTC to have failed to disclose dozens of pre-trade-mid-market marks (PTMMM) alongside failing to diligently supervise its PTMMM compliance process, violating CFTC Regulation 23.602.
As part of the order, StoneX is subject to a civil monetary penalty of $650,000. Additionally, the broker is required to complete its remediation process and submit reports to the CFTC’s Division of Enforcement concerning its compliance.
According to the CFTC, StoneX admits that for numerous swap transactions executed in 2016 and 2018, it either failed to disclose any PTMMM or did not adequately supervise this process, leading to non-compliance with disclosure requirements. This failure stems from StoneX’s lack of accurate procedures, insufficient training and monitoring of its staff, and delays in providing PTMMMs to counterparties.
“Specifically, StoneX failed to implement procedures to ensure that its PTMMMs were accurate (i.e., consistent with StoneX’s internal pricing methodologies), failed to adequately train and monitor its associated persons regarding PTMMM disclosure requirements, and failed to timely provide PTMMMs to counterparties. The Division of Enforcement staff responsible for this case are Daniel C. Jordan, Rick Glaser, and former staff member Amanda Burks,” the statement reads.
By depriving clients of transparency into the relative value of the swaps it was offering, StoneX violated CFTC’s business conduct standards for swap dealers, the regulator said.
StoneX Markets is a wholly-owned subsidiary of StoneX Group Inc., which is a diversified global financial services organization providing execution, risk management, advisory, and clearing services. The firm has been provisionally registered as a swap dealer with the CFTC since the inception of the regime in 2012.
Earlier in January, the swap dealer arm of StoneX, formerly known as INTL FCStone, agreed to pay a $1,000,000 fine to the US National Futures Association (NFA) that accused it of violating margin rules.
The industry self-regulatory organization said the firm violated NFA Compliance Rule 2-4 by failing to disclose to its counterparties that it was not calculating initial margin (IM) according to its customary procedures.
Additionally, NFA accused StoneX Markets LLC of failing to maintain and enforce adequate risk management with respect to its value-at-risk calculation and daily IM determination.
The Chicago-based regulator, which is responsible for policing the US futures industry, added that the firm didn’t retain the required records to provide pre-trade mid-market marks to counterparties. The NFA statement says StoneX also violated two other compliance rules by the lack of supervising certain operations.