CFTC Orders StoneX Markets LLC to Pay $650,000 for Violations of Swap Business Conduct Standards
The Commodity Futures Trading Commission (CFTC) has taken enforcement action against StoneX Markets LLC (StoneX), a registered swap dealer, for violations related to the agency's Business Conduct Standards governing swap dealers. The CFTC's order, which combines filing and settlement, outlines the charges against StoneX and imposes a $650,000 civil monetary penalty.
The specific violations pertain to StoneX's handling of Pre-Trade Mid-Market Marks (PTMMM) and its supervision of the PTMMM compliance process, as governed by CFTC Regulation 23.431 and CFTC Regulation 23.602, respectively.
The CFTC's investigation found that StoneX failed to disclose thousands of PTMMMs, thereby contravening CFTC Regulation 23.431. Additionally, the company did not effectively oversee its PTMMM compliance process, constituting a violation of CFTC Regulation 23.602.
As part of the settlement, StoneX has admitted to these violations. The CFTC order necessitates that the company take corrective actions and submit reports on its compliance efforts to the Division of Enforcement.
The violations occurred over a period spanning from 2016 to 2022. StoneX's lapse in diligently supervising its PTMMM disclosure process resulted in non-compliance with PTMMM disclosure requirements for a substantial number of swap transactions. Specifically, the company failed to establish procedures ensuring the accuracy of PTMMMs, including their alignment with StoneX's internal pricing methodologies. Moreover, StoneX did not adequately train and monitor its associated individuals regarding PTMMM disclosure obligations, and it did not provide PTMMMs to counterparties in a timely manner.
This enforcement action by the CFTC serves as a reminder of the regulatory obligations incumbent upon swap dealers, which are designed to maintain transparency and fairness in the derivatives market. Compliance with business conduct standards, including the accurate and timely disclosure of Pre-Trade Mid-Market Marks, is essential to safeguard market integrity and protect market participants.
The $650,000 civil monetary penalty imposed on StoneX reflects the CFTC's commitment to upholding regulatory standards and ensuring accountability within the financial industry. StoneX will need to complete the mandated remediation measures and submit comprehensive reports outlining its compliance efforts to the CFTC's Division of Enforcement.
The CFTC's action against StoneX underscores the critical importance of diligent supervision and adherence to regulatory requirements, especially in sectors as complex and interconnected as the derivatives market.