This week ICE Futures Europe issued a Disciplinary Notice (click here) to Clarksons Futures Limited, a shipping futures broker, for several Block Trade-related breaches. According to the Notice, the indiscretions included the violations of Rule F.7.6 (Block Trades - Submission of details of Contingent Agreement to Trade in respect of Block Trades), Rule A.11 (Systems and Controls), Rule F.3 (Transaction Records), Trading Procedures 3.1.4 (relating to communications recording and retention), Section 5 (Prohibitions) of the ICE Futures Europe Block Trades and Asset Allocation Policy (March and August 2023 versions) and Section 9 (Prohibitions) of the ICE Futures Europe Block Trades and Asset Allocation Policy (June 2022 version). ICE Futures Europe found that between September 2022 and December 2023:
- Clarksons brokers had disclosed details of Block Trades to market participants not party to the Block Trades, prior to details of the Block Trades being broadcast by ICE;
- Clarksons did not have adequate systems and controls in place during the relevant period to properly supervise and monitor its brokers’ activity in this regard and ensure compliance with exchange rules;
- Clarksons did not meet adequate standards in respect of its record keeping, with the firm being unable to provide ICE with complete communication records for certain Block Trades reported to the exchange in October and November 2022;
- Certain Block Trades reported by Clarksons in August 2022 and February 2023 were reported to ICE with incorrect agreement times and were not reported within the required reporting window.
Clarksons agreed to pay a fine of GBP 108,500 (reduced from GBP 155,000 for early settlement). In its Disciplinary Notice, ICE notes that Clarksons cooperated with the exchange throughout the investigation and that the penalty took into consideration (amongst other things) the extensive remedial steps taken by Clarksons regarding the alleged breaches.
As is customary in such notices, ICE reminds members that they should have in place effective systems and controls to ensure that proper record keeping is maintained in respect of trading activity and that such activity is properly monitored and supervised. This includes ensuring that staff only use approved communication applications, media and devices in accordance with internal policies and procedures, and that usage of applications such as WhatsApp is properly captured using recording software.
ICE also reminds Members that details of a Contingent Agreement to Trade constitutes non-public information and that such details must not be disclosed to anyone except those party to the agreement prior to the details of the resultant Block Trade being broadcast by the exchange.
While this Disciplinary Notice targets the broker, trading firms should also ensure that front office is aware of such practices and that they should avoid participating in any trading activity predicated on non-public information, even in cases where they are not the party directly responsible for disclosing such information.
