CME fines StoneX Financial for pre-hedging violations, citing improper disclosures, supervisory failures, and rule violations.
CME fines StoneX Financial for pre-hedging violations, citing improper disclosures, supervisory failures, and rule violations.
CME fines StoneX following a disciplinary notice against StoneX Financial Inc., issued pursuant to a settlement in which the firm neither admitted nor denied the alleged violations or underlying facts. The New York Mercantile Exchange Business Conduct Committee, however, found that StoneX Financial breached multiple rules on several occasions between April 2022 and August 2022, and again in April 2024.
During these periods, the firm facilitated pre-hedging activity conducted by a wholly owned subsidiary of StoneX Group and failed to properly disclose its role during block trade negotiations. The Panel revealed that a StoneX Financial employee received a solicitation from a counterparty for a block trade in Crude Oil, NY Harbor ULSD, RBOB, and Platinum futures contracts.
Yet, before finalizing the block trade with the counterparty, the StoneX Group subsidiary executed opposite-side trades on Globex in the same products. This conduct essentially enabled the subsidiary to pre-hedge, allowing it to secure profits in advance of the block trades. As a result, StoneX Financial benefited financially through referral fees paid on these transactions. Moreover, the Panel concluded that StoneX Financial failed to adequately supervise the employee involved.
The firm did not provide sufficient compliance training or educational resources concerning NYMEX rules, nor did it monitor the employees’ trading activity closely enough to ensure adherence to those rules. This lack of supervision contributed to the violations, highlighting a broader issue within the firm’s internal controls.
Ultimately, the Panel ruled that StoneX Financial violated NYMEX Rules 432.W. and 526. Consequently, under the terms of the settlement, StoneX Financial must pay a $125,000 fine and return $449,910 in profits obtained through the pre-hedging activity. This disciplinary action took effect on April 21, 2025.
By taking this action, CME Group reinforces the importance of transparency and compliance in derivative markets. Firms are expected to uphold fair trading standards and ensure rigorous internal oversight to maintain market integrity.
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