Securities Regulation Daily NYMEX, individuals to settle CFTC insider trading matter
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Tuesday, August 4, 2020

NYMEX, individuals to settle CFTC insider trading matter

By Mark S. Nelson, J.D.

NYMEX and two individuals have agreed to settle charges regarding the provision of material, nonpublic information about oil & gas derivatives trades to a third party.

The New York Mercantile Exchange, Inc., William Byrnes, and Christopher Curtin agreed to settle the CFTC’s charges that Byrnes and Curtin, while working for NYMEX, provided confidential information about derivatives trades to Ron

Eibschutz. Eibschutz also is the subject of an enforcement action, but the settlement with the CFTC only applies to NYMEX, Byrnes, and Curtin, who have agreed to abide by multiple injunctions and to jointly and severally pay a $4 million civil money penalty (CFTC v. Byrnes, Broderick, V., August 3, 2020).

According to the court’s consent order, Byrnes and Curtin, who worked at NYMEX’s ClearPort Clearing facilitator desk, passed material, nonpublic information about oil & gas derivatives trades to Eibschutz, a broker, during the period 2008 to 2010. The confidential information included counterparty identities, whether an option was bought or sold, whether an option was a put or a call, volume data, expiration dates, strike prices, and trade prices.

press release announcing the settlement stated that this was the first time the CFTC had charged an exchange regarding disclosures of material non-public information by exchange employees.

CFTC Enforcement Director James McDonald noted the significance of the settlement: "Today’s settlement sends a strong message that the CFTC will work tirelessly to protect our market participants against unlawful disclosures of their confidential information to ensure that the fairness and reliability of our markets are not compromised. Like any other employer, commodity exchanges are responsible for violations of the CEA or CFTC regulations by their officials, employees, and agents within the scope of their employment or office."

The CFTC alleged that Byrnes, and Curtin violated Commodity Exchange Act Section 9(e)(1) and CFTC Regulation 1.59(d)(1)(ii). Specifically, Byrnes and Curtin were alleged to have engaged in insider trading for willfully and knowingly disclosing material, nonpublic information for purposes inconsistent with the performance of their official duties as exchange employees. NYMEX was alleged to have been vicariously liable for Byrnes’ and Curtin’s conduct under CEA Section 2(a)(1)(B).

Byrnes and Curtin are subject to numerous injunctions, including trading bans. Byrnes, Curtin, and NYMEX also are required to jointly and severally pay a civil money penalty of $4 million, although the amounts applicable to Byrnes and Curtin are capped at $300,000 and $200,000, respectively.

The case is No. 13-cv-01174.

Attorneys: David W. MacGregor for the CFTC. Chelsea Lin O'Donnell (Bracewell LLP) for Ron Eibschutz. Joseph Peter Allgor (Dorsey & Whitney LLP) for William Byrnes. Samuel Fawkner Abernethy (Offit Kurman, Attorneys at Law) for Christopher Curtin. Patrick Joseph Fitzgerald (Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates) for New York Mercantile Exchange, Inc.

Companies: New York Mercantile Exchange, Inc., CME Group

MainStory: TopStory CFTCNews ClearanceSettlement CommodityFutures Derivatives Enforcement ExchangesMarketRegulation FinancialIntermediaries FraudManipulation GCNNews InvestorEducation NewYorkNews

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