Nadex bans member from trading due to manipulative conduct

Maria Nikolova

An investigation has shown that Davis Ramsey engaged in a scheme to manipulate the expiration value of several binary contracts.

North American Derivatives Exchange (Nadex), a subsidiary of IG Group Holdings plc (LON:IGG), has announced a disciplinary action against one of its members over manipulative conduct.

An investigation into Davis Ramsey’s trading activity has shown that between August 1, 2016 and May 10, 2017, Ramsey engaged in a scheme to successfully manipulate, or attempt to manipulate, the expiration value of several binary contracts by entering non-bona fide transactions in the corresponding underlying CME futures contracts near the time of the expiration of the Binary Contracts with the intent to influence the settlement of the respective Binary Contracts. Nadex found Ramsey had violated the Exchange rules prohibiting such manipulative conduct, specifically Rules 5.19(h), (i), (n), and (t).

These rules state that:

  • (h) No Person shall engage in any activity that presents a risk of harm to Nadex, its Members, or the public.
  • (i) No Person shall engage in any activity that adversely affects the integrity of the Market or its underlying systems.
  • (n) No Person shall engage in any activity that is intended to, or has the effect of, manipulating the market in violation of Sections 6(c) and 9(a)(2) of the CEA and no Person shall engage in any other activity that would violate the CEA or the Commission’s Regulations.
  • (t) No Member shall engage in conduct or practices inconsistent with just and equitable principles of trade or conduct or practices detrimental to the best interests of the Exchange, its Members and/or FCM Customers.

Furthermore, Nadex found that Ramsey engaged in the same manipulative activity in the Nadex account belonging to his father, Robert Ramsey. Thus, Davis Ramsey also violated Section (a) of the Membership Agreement and Rule 5.19(g)(1), which prohibit a Nadex Member from accessing, controlling, or trading in an account belonging to another Member.

By settlement agreement, in which Davis Ramsey neither admitted nor denied the findings or conclusions of the investigation, he will have to pay disgorgement in the amount of $250,636 and was fined $140,000. Furthermore, according to the agreement, Ramsey’s membership has been revoked, and he has been permanently banned from trading on the Nadex markets by any means.

The effective date of the sanctions is September 27, 2018.

In August this year, Nadex temporarily suspended and fined another of its members – Eric Leung, for suspicious activities. Following an investigation, Nadex determined his activity constituted “spoofing”.

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