Goldman Sachs Penalized for Wash Trade

Goldman Sachs faces penalties for wash trade violations, raising concerns in the financial industry. Learn more.

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CE disciplines Goldman Sachs: Wash Trade Penalties shared after Business Conduct Committee Investigation. The inquiry, concluding on February 21, 2024, centred on an incident on July 29, 2022, suspecting GSCO of violating Exchange Rule 4.02(c).

The investigation revealed that on the specified date, a GSCO employee received simultaneous buy and sell orders for execution in the same MSCI Emerging Index Futures contract. However, the employee allegedly failed to inquire about the ownership of the orders, neglecting to confirm whether they belonged to the same Principal. Consequently, the executed orders matched opposite each other, resulting in what is known as a wash trade.

Goldman Sachs Faces Wash Trade Penalties

As per the terms of the settlement reached between ICE and GSCO, the financial institution neither admitted nor denied the alleged rule violations. However, GSCO has agreed to pay a monetary penalty of $10,000.

The relevant rule in question, Rule 4.02(c), pertains to Trade Practice Violations and explicitly prohibits the execution of wash sales, accommodation trades, fictitious sales, or prearranged trades in connection with the placement of any order or execution of any transaction.

The disciplinary notice also referenced Wash Trade FAQ #3, which outlines the responsibilities of market participants upon receiving simultaneous buy and sell orders for the same Principal. The FAQ emphasizes that market participants should determine if the orders are for the same Principal and, if for an omnibus account, whether they belong to different Principals within the omnibus account. If the orders ultimately involve the same Principal and trade opposite each other, market participants may violate Exchange Rule 4.02(c) if aware or should have been aware of the potential wash trade violation.

This incident underscores the importance of adhering to trading rules and conducting thorough due diligence to prevent rule violations, with financial penalties serving as a reminder of the consequences for non-compliance within the financial industry.

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