TFS-ICAP senior managers respond to CFTC allegations

Maria Nikolova

Ian Dibb and Jeremy Woolfenden argue that the CFTC fails to allege that the practice called “flying’” violates the CEA.

Several months after TFS-ICAP LLC and TFS-ICAP Ltd. opposed the Commodity Futures Trading Commission (CFTC) allegations of fraud and supervision failures, Jeremy Woolfenden and Ian Dibb who are also defendants in this case, sought to respond to the CFTC claims.

Jeremy Woolfenden was the Global Head of Emerging Markets broking at TFS-ICAP, whereas Ian Dibb was the CEO of TFS-ICAP from approximately 2011 to 2017.

Mr Woolfenden and Mr Dibb have earlier this week submitted Letters which seek to highlight alleged deficiencies in the CFTC complaint in this case.

Jeremy Woolfenden, who is a United Kingdom citizen, argues that the CFTC claims against him have to be dismissed as he has never lived in the United States and never engaged in any alleged conduct in New York. The CFTC also fails to allege sufficient “minimum contacts” of Mr Woolfenden with the forum to satisfy the due process requirements, he says.

Both Mr Woolfenden and Mr Dibb argue that the practice called “flying” does not violate the Commodity Exchange Act.

According to the Complaint, “flying” is when a broker posts a bid or offer that is not backed by a specific trading institution. The Complaint alleges that this practice is fraudulent because the Volbroker User Agreement and User Guide indicate that bids and offers posted by brokers are binding bids and offers backed by trading institutions. These documents say no such thing.

The defendants insist that “flown” levels posted by brokers were merely good faith estimates of where the market would likely trade – a permissible and non-fraudulent practice – as opposed to a false factual representation that a specific institution was making an offer at a specific level. Therefore, according to Mr Woolfenden and Mr Dibb, the CFTC cannot allege that these levels were fraudulent.

Additionally, as detailed in TFS’s letter, the Complaint fails to allege materiality. Contrary to the CFTC’s assertions in response to TFS’s letter, there is nothing in the Complaint that “gives rise to a strong inference of materiality,” and, even if there were, that is neither a particular allegation nor the relevant legal standard. Rather, to survive a motion to dismiss, the CFTC must show that a “there is a substantial likelihood that a reasonable investor would consider the alleged misstatements important in making an investment decision.”

Mr Dibb notes that, although the Complaint refers to the incorporation of certain bids and trades into proprietary trading models, the Complaint is silent on whether flown prices and printed trades were actually important to investor decisions.

Let’s recall that the CFTC downplayed the arguments raised by TFS-ICAP LLC and TFS-ICAP Ltd. and insisted no amendment to its complaint is necessary. It remains to be seen what the CFTC’s reaction to Dibb’s and Woolfenden’s argumentation would be.

Read this next

Retail FX

Italian watchdog red flags Olympus Brokers, UnicoFX and Allfina Group

Italy’s Commissione Nazionale per le Società e la Borsa (CONSOB) has shut down new websites in an ongoing clampdown against firms it accuses of illegally promoting investment products in the country.

Retail FX

XTB revenues hits zł1.45 billion in 2022, Q4 earnings disappoint

Poland-based Forex and CFDs broker, XTB has reported its final results for Q4 of 2022 and the full fiscal year ending on December 31, 2022, showing one of its most successful corporate years.

Executive Moves

Lirunex Limited recruits Waleed Salah as head of MENA sales

Maldives-based brokerage firm Lirunex Limited has secured the services of Waleed Salah, who joined the company in the role of its head of sales for the MENA region.

Executive Moves

Trading 212 parts ways with co-founder Borislav Nedialkov

Trading 212 has a void to fill at its FCA-regulated business in London, following the departure of two key players, Raj Somal and Borislav Nedialkov.

Digital Assets

Binance acquires troubled crypto exchange GOPAX

Binance, the world’s largest digital asset trading platform, has reportedly acquired a majority stake in the troubled South Korea-based cryptocurrency exchange GOPAX.

Digital Assets

Kraken exits Middle East, closes UAE office

Digital currency exchange Kraken will close down its operations in Abu Dhabi, UAE and lay off the majority of its team focused on the Middle East and North Africa.

Industry News

CFTC comments on ION Cleared Derivatives issues after Russian-linked hack

“The ongoing issue is impacting some clearing members’ ability to provide the CFTC with timely and accurate data. As this incident unfolded, it became clear that the submission of data that is required by registrants will be delayed until the trading issues are resolved.”

Industry News

FCA took down 14 times more misleading ads in 2022 thanks to technology

The FCA has made significant improvements to the digital tools it uses to find problem firms and misleading adverts. These improvements have enabled it to work through a much larger number of cases compared with 2021.

Executive Moves

HKEX appoints ex-Goldman Sachs Matthew Cheong to lead platform’s focus on derivatives

“He has worked for a number of the world’s leading investment banks and his experience will be invaluable to HKEX as we continue to enhance our derivatives product offerings and build on our innovative and robust platform business, connecting capital with opportunities.”

<