All of the entered orders were activated on the system between 1 and 3 seconds before the end of the trading session. The number of separate orders simultaneously activated on each of the days investigated ranged between 2 and 10. The IPE was concerned that the orders were timed to enter the market so close to the end of the session that other market participants would not have sufficient time to trade with the orders if they wished.
Details of Sanctions
The IPE has settled the matter on the following terms.
- Cargill Investor Services Ltd acknowledges that the orders complained of on 28 July, 6 August and 20 August 1999 were capable of affecting settlement prices if they had been accepted by the IPE for inclusion in the settlement price calculation.
- Cargill Investor Services Ltd accepts that, as a Member of the IPE, they are responsible for ensuring that orders that are accepted from clients and brought to the market comply with the IPE’s Rules.
- Cargill Investor Services Ltd recognises that their procedures for the acceptance of such orders and their response to the concerns expressed to them by the IPE and the subsequent IPE investigation were inadequate and fell short of acceptable standards.
- The IPE accepts that there was no corporate intent by the Member to manipulate or assist a client to manipulate the price of IPE Natural Gas Futures contracts.
- Cargill Investor Services Ltd will pay a fine of £150,000 in respect of the shortcomings identified in these proceedings and legal costs of £26,588 incurred by the IPE during the investigation.
- Ms Sutin accepts that by acting on her client’s instructions to deliberately activate orders in the last 3 seconds of trading on ETS, her conduct fell below the standards expected by the IPE of traders registered with it and constituted a breach of Rule E.2 (b) in that it was liable to bring the IPE or its Members into disrepute.
- That, in respect of each pattern of trading entered on 28 July, 6 August and 20 August, Ms Sutin’s registration as a registered electronic trader be suspended for a period of 2 years, concurrently and with effect from the date of her suspension by her former employers on 25 November 1999.
- That Ms Sutin, in addition, pay a fine of £5,000 in relation to the first pattern of orders on 28 July.
- Ms Sutin also to pay £7,500 towards the IPE costs.
Background
The IPE was alerted to the situation on 28 July following complaints from market users about orders entered into ETS during the last few seconds of trading which may have affected the settlement price of the contract. Market users believed that these orders were at unrepresentative levels. The orders were subsequently identified as having being entered by Ms Sutin and activated by her 2 seconds before the end of the trading session. The IPE decided to ignore these orders in the calculation of the settlement price for that day.
The IPE notified Cargill Investor Services Ltd that it was investigating the matter on 2 August but the same trader entered similar orders on 6 August. A meeting took place between Exchange officials and the firm’s compliance staff on 17 August to address the IPE’s concerns. Notwithstanding the IPE’s concerns being made known to Compliance and internal guidance provided (though Cargill’s compliance staff accept that this could have been clearer), Ms Sutin again entered further orders on 20 August which were activated 3 seconds before the end of the trading session. These orders were also excluded from the settlement calculation.
Subsequently, Cargill Investor Services Ltd initially failed to respond in a timely and adequate manner to the IPE’s investigation of the matter.
Marc Leppard, Director of Regulation, said of these proceedings; "This action demonstrates that Member firms and traders need to exercise care in the handling of customer orders and ensure that concerns expressed by the IPE are dealt with promptly and appropriately."
