NFA fines introducing broker Classic Energy, suspends its president from membership

Maria Nikolova

The penalties stem from an NFA examination of Classic Energy which found that its president Mathew Webb engaged in a deceptive trading scheme.

The United States National Futures Association (NFA) today announces that it has ordered introducing broker Classic Energy LLC to pay a $200,000 fine and has suspended its president, Mathew Webb from NFA membership through January 3, 2022.

The Decision, issued by an NFA Hearing Panel, is based on a Complaint issued by NFA’s Business Conduct Committee (BCC), and a settlement offer submitted by Classic Energy and Webb.

The vast majority of Classic Energy’s customers are large commercial entities and market makers that are eligible contract participants (ECPs) engaging in block trading of futures and options in energy markets, including natural gas. Classic Energy touts itself as “neutral intermediary” that acts as a broker for block trades by showing bids and offers in particular instruments to its ECP customers and then submitting their executed block trades to the appropriate exchange (ICE, CME, etc.) for reporting purposes.

Webb also owned and operated MDW Consulting LLC, doing business as MDW Capital LLC. MDW operated out of Classic Energy’s office. MDW is a proprietary trading firm which Webb used for his personal investments.

Classic Energy also employed Lee Parsons Tippett II as an AP of the firm. Tippett previously worked as a trader for MDW.

In 2015, NFA conducted an examination of Classic Energy which found that Webb engaged in a deceptive trading scheme that misused critical block order information of certain Classic Energy customers to benefit himself and his personal company MDW.

As a part of the deceptive scheme, Webb would discuss a natural gas block trade with a Classic Energy customer, including a specific execution price. After getting essential order information (for instance, buy/sell and price) from the Classic Energy customer, he would then enter futures orders for MDW on ICE’s electronic trading system in the same futures contract and on the same side of the market as the Classic Energy’s customer’s block trade.

At the time MDW’s futures order was submitted, the market price offered on ICE’s ETS was better than the price Webb had discussed with Classic Energy’s customer to execute the block trade. Then, Webb arranged for MDW (via Tippett’s ICE user ID) to take the opposite side of the customer’s block trade.

To carry out the scheme, Webb would report to ICE the block trade for Classic Energy’s customer around the time MDW’s futures order was executed. MDW’s block trade position would be offset by MDW’s prior futures trade that was executed before the time Webb reported to ICE the block trade for Classic Energy’s customer.

The key to the scheme was ensuring that MDW took the opposite side of block trades with Classic Energy’s customers.

Webb never discloser to Classic Energy’s customers that his personal company – MDW – was the counterparty to their block trades.

The Hearing Panel found that Classic Energy and Webb failed to uphold high standards of commercial honor and just and equitable principles of trade. The Hearing Panel also found that Classic Energy failed to maintain adequate and complete records and failed to adequately supervise.

Read this next

Retail FX

FF Simple and Smart Trades says Goodbye to CySEC authorization

The Cyprus Securities and Exchange Commission (CySEC) confirmed that it has wholly withdrawn the Cyprus Investment Firm (CIF) licenses of FF Simple and Smart Trades Investment Services Ltd.

Crypto Insider

Shining the Light in Crypto’s Dark Places

Something changed in regulators’ minds after the November crash of the FTX crypto exchange.

Executive Moves

Financial Commission Adds Sam Low to Dispute Resolution Committee

The Financial Commission (FinaCom PLC), a dispute resolution service that caters to the financial services industry, has appointed Sam Low as the newest member of its Dispute Resolution Committee (DRC).

Digital Assets, Uncategorized

De-facto owner of Bithumb exchange arrested in South Korea

South Korean prosecutors have arrested Kang Jong-Hyun, the anonymous chairman and owner of the country’s largest cryptocurrency exchange, Bithumb, on charges of embezzlement and stock manipulation.

Retail FX

Interactive Brokers volumes snap three-month losing streak

Electronic brokerage firm Interactive Brokers LLC (NASDAQ:IBKR) said its trading volumes rose in January, an indication that investor confidence in the financial markets is rebounding after having been fairly mixed over the past few months.

Digital Assets

VVF invests $5 million in Everscale, a potential Layer 2 solution for Venom blockchain

“For us, this is a strategic investment aimed at the technological development of projects and teams around technologies that we focus on and actively develop. In particular, we are talking about the Venom blockchain project and its ecosystem, which is planned to be launched soon and for which Everscale is a potential Layer 2 solution.”

Institutional FX

FXSpotStream volume ends string of declines on January rebound

Trading volumes on institutional FX platforms surged in January as traders increased their bets on central bankers’ policy with evidence mounting that inflation and economic growth are both losing momentum.

Industry News

DeFi firm Aurox launches SEC-compliant crowdfunding campaign on tZERO

“This is a great opportunity for us to raise capital from our community and the broader public on a leading fully regulated platform. We are confident that the tZERO Markets platform will provide us with the exposure and reach we need to attract a diverse investors to support our business growth.”

Industry News

Morgan Stanley launches ETF platform with six ESG-focused products by Calvert

“These new ETFs will resonate strongly with investors who seek competitive investment results while promoting positive change and supporting companies that are leaders in improving long-term shareholder value and societal outcomes.”

<