Bridging the Week by Gary DeWaal


Bridging the Week by Gary DeWaal: May 4 to 8 and 11, 2015 (Spoofing Redux; Virtual Currencies; Larger Tick Size; Block Trades; CCP Equivalency; SEC Forum Choices)

AML and Bribery    Bitcoin Ecosystem    Block Trades and EFRPs    Bridging the Week    Compliance Weeds    Credit and Risk    Exchanges and Clearing Houses    High Frequency Trading    Legal Weeds    Managed Money    My View    Supervision    Trade Practices (including Disruptive Trading)   
Published Date: May 10, 2015

For the third week in a row, an enforcement action involving allegations of spoofing was the highlight of financial services industry news. The CFTC brought a lawsuit last week against the same two traders that the CME Group had summarily barred the prior week from accessing all its marketplaces for 60 days for allegedly engaging in disruptive trading earlier this year. Separately, the SEC approved a pilot program to increase the minimum tick size for quotes and trading in certain small capitalization stocks while FinCEN and the US Department of Justice sanctioned two related purveyors of a virtual currency for not maintaining robust AML procedures. As a result, the following matters are covered in this week’s Bridging the Week:

  • Two Traders Subject of CME Summary Suspension for Alleged Spoofing Sued by CFTC Too (includes Legal Weeds);
  • Money Service Businesses for Second Largest Virtual Currency Fined for AML Deficiencies; Bitcoin Exchange Gets First NY License as Trust Company (includes My View);
  • SEC Approves Larger Tick Size Pilot for Small Companies; Study Suggests Larger Tick Sizes May Help HFTs and Not Market Quality;
  • ICE Futures U.S. Fines Member US $200,000 for Problematic Block Trades (includes Compliance Weeds);
  • CFTC Chairman Argues for Equivalent Treatment for US CCPs by the European Commission; EC and CFTC Commit to Continue Talking—That’s All for Now (includes My View);
  • Where to Bring an Enforcement Action: the SEC’s Enforcement Division Issues Guidance Regarding Its Decision-Making;
  • Broker-Dealer LPL Fined US $10 Million by FINRA for Oversight Failures Related to Complex Products Sales;
  • IOSCO Consults on Sound Practices to Assess Credit Risk; and more.

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Article Version:

Two Traders Subject of CME Summary Suspension for Alleged Spoofing Sued by CFTC Too

Last week, the Commodity Futures Trading Commission commenced a lawsuit in federal court in New York against Heet Khara and Nasim Salim for alleged spoofing activities on the Commodity Exchange, Inc. from February through at least April 28, 2015. The CFTC claimed the respondents engaged in disruptive trading involving gold and silver futures contracts.

Previously, both respondents were summarily suspended by the CME Group from accessing all its marketplaces for 60 days for the same conduct. (Click here for details in “CME Group Summarily Suspends Trading Privileges of Two Traders Without Hearing for Alleged Spoofing and Non-Cooperation” in the May 3, 2015 edition of Bridging the Week.)

On at least two occasions, alleged the CFTC, Mr. Khara placed multiple small quantity layered orders on one side of the market to help effectuate an execution of a few small quantity orders he previously placed on the opposite side of the market that he desired to be filled. Once some of the desired orders were filled, Mr. Khara cancelled the multiple layered orders on the opposite side of the market.

According to the CFTC, Mr. Khara initially engaged in his disruptive trading practices through an account at an unnamed futures commission merchant (so-called “FCM A”). Mr. Khara’s account was introduced to FCM A by Zonyx DMCC, a Dubai-based unregistered introducing broker that Mr. Salim heads and for which he serves as authorized trader.

After CME Group alerted FCM A on February 25, 2015, regarding certain of Mr. Khara’s alleged disruptive trades and FCM A suspended Mr. Khara’s direct market access, Mr. Khara opened a second account at another unnamed FCM (so-called “FCM B”). Mr. Salim already maintained an account at FCM B.

Afterwards, alleged the CFTC, both Mr. Khara and Mr. Salim individually engaged in similar disruptive trading practices through accounts at FCM B, in the style of Mr. Khara’s prior trading at FCM A. In addition, Mr. Khara and Mr. Salim sometimes coordinated their disruptive trading activities through accounts at FCM B, claimed the CFTC.

In connection with this matter, the CFTC charged Mr. Khara and Mr. Salim with disruptive trading under federal law and CFTC rules, and simultaneously obtained a freeze against all assets of the respondents. The CFTC seeks an injunction, disgorgement of profits and a fine.

Legal Weeds: Unlike in the CFTC’s recently publicized lawsuit against Navinder Sarao for contributing to the May 2010 “Flash Crash” through alleged spoofing activities, the CFTC only alleges against Mr. Khara and Mr. Salim violations of the express prohibition against disruptive trading under federal law and CFTC rules. It does not also allege, as in the CFTC’s case against Mr. Sarao, violations of the prohibitions against manipulation, attempted manipulation and conduct which constitutes a deceptive device or contrivance. (Click here for details in “London-Based Futures Trader Arrested, Sued by CFTC and Criminally Charged With Contributing to the May 2010 ‘Flash Crash’ Through Spoofing” in the April 22, 2015 edition of Between Bridges.) Superficially, there appears to be no material differences in the types of conduct at issue in the two cases, other than Mr. Khara’s and Mr. Salim’s allegedly wrongful conduct occurring during a much shorter time period.

Briefly:

  • Money Service Businesses for Second Largest Virtual Currency Fined for AML Deficiencies; Bitcoin Exchange Gets First NY License as Trust Company: Two purveyors of XRP, the second most popular virtual currency after Bitcoin, were fined last week by the Financial Crimes Enforcement Network and the US Department of Justice for failure to comply with FinCEN’s anti-money laundering requirements. Ripple Labs Inc., which operated as a money service business (MSB) and sold its virtual currency XRP to the public, was sanctioned for not registering as an MSB and not implementing and maintaining an effective AML program, as required by FinCEN, during parts of March and April 2013. XRP LLC, which was set up by Ripple as a subsidiary and partial successor of its business, and also operated as an MSB, was also sanctioned for not implementing and maintaining an effective AML program at various times from July 2013 through March 2014. XRP LLC was additionally sanctioned for not reporting various suspicious transactions to FinCEN. Generally, firms selling and buying virtual currency to the public for fiat currency—so-called “exchangers”—have been required to register with FinCEN as MSBs since March 18, 2013 (click here to access the guidance). MSBs—whether registered or not—are required to have an effective written AML program and to report certain suspicious activities to FinCEN. To resolve FinCEN’s investigation, Ripple and XRP LLC together agreed to a fine of US $700,000 and to implement certain remedial measures to enhance their AML procedures. Of this fine, US $450,000 will be earmarked to end an investigation by the US Department of Justice. Separately last week, the New York State Department of Financial Services granted its first charter under NY banking law to itBit Trust Company, a commercial Bitcoin exchange. The NYDFS expects to issue its final BitLicense regulatory framework for purveyors of virtual currency in late May 2015. At such time, itBit will be required to comply with both the requirements of a trust company and those under the new BitLicense regime.

My View: As I wrote just a few weeks ago, although many are now skeptical of virtual currencies, Bitcoin and other cryptocurrencies are receiving more and more attention by investors—both as investments in themselves as well as a commodity around which a nascent support industry is developing. Currently, for example, the Commodity Futures Trading Commission is considering the designation of LedgerX both as a swap execution facility and a derivatives clearing organization in connection with options on Bitcoin. (Click here for details in the article, “LedgerX Seeks CFTC Designation as a Clearinghouse and Swap Execution Facility for Bitcoin Options” in the December 21, 2014 edition of Bridging the Week.) Although there have been issues regarding exchangers of virtual currencies, such as Ripple and XRP LLC, the problems have not been around the integrity of the cryptocurrencies themselves. With enhanced regulation of the purveyors of virtual currencies, it is more likely that cryptocurrency use will become more mainstream. (Click here for an introduction to Bitcoin and an overview of relevant regulatory developments in the November 26, 2013 article “Bitcoin: Current US Regulatory Developments” by Katten Muchin Rosenman.)

  • SEC Approves Larger Tick Size Pilot for Small Companies; Study Suggests Larger Tick Sizes May Help HFTs and Not Market Quality: The Securities and Exchange Commission generally approved a proposal by the Financial Industry Regulatory Authority and the national securities exchanges to widen minimum quoting and trading increments for certain stocks with smaller capitalization. The objective is to assess whether such changes might enhance their market quality. The SEC made some changes from the original August 2014 proposal, including extending from one to two years the term of the pilot program and modifying the market capitalization thresholds for securities to be included. The pilot program will include stocks of companies with US $3 billion or less of market capitalization, average daily trading volume of one million shares or less and a volume weighted average daily trading price of at least US $2. The pilot program will begin by May 6, 2016, and include one control group of 1400 securities and three test groups of approximately 400 securities—each subject to slightly different conditions. One test group will have pilot securities quoted and traded in minimum five-cent increments, subject to certain conditions and exceptions. Recently, Chen Yao, an assistant professor at the University of Warwick, and Mao Ye, an assistant professor at the University of Illinois at Urbana-Champaign published a quantitative study entitled “Tick Size Constraints, High Frequency Trading, and Liquidity” that argued that large relative tick sizes in low-priced securities decreases price competition and increases the importance of speed for trade execution—thus helping high-frequency traders and not necessarily improving market quality (click here to access the study). According to these professors, “[our] results undermine the rationale for ... the policy proposal to increase the tick size to five cents.” The Office of Financial Research of the US Department of Treasury funded this study in part. (Click here for further information in the article “SEC Approves Pilot to Assess Tick Size Impact for Smaller Companies” in the May 8, 2015 edition of Corporate & Financial Weekly Digest by Katten Muchin Rosenman.)
     
  • ICE Futures U.S. Fines Member US $200,000 for Problematic Block Trades: ICE Futures U.S. fined EOX Holdings LLC US $200,000 for various infractions related to its handling of block trades from July 2013 through February 2014. Among other violations, IFUS alleged that EOX (1) on multiple occasions submitted block trades to the exchange that were below minimum quantity thresholds and reported trades outside required time periods (i.e., 15 minutes for energy futures and options); (2) on multiple occasions did not comply with recordkeeping requirements for customer orders; and (3) failed to supervise certain employees. EOX consented to the fine without admitting or denying any of the rule violations. On March 30,2015, CME Group fined EOX US $40,000 for executing eight EFRP transactions between July and November 2011 and incorrectly reporting them as block trades. The firm also allegedly failed to maintain CME Group required records to support such transactions. (Click here for details in "Problematic EFRPs and Wash Trades Sanctioned by CME Group and ICE Futures U.S." in the April 5, 2015 edition of Bridging the Week.)

Compliance Weeds: Block trades on ICE Futures U.S. are strictly proscribed (click here to access IFUS Rule 4.07) as clarified, most recently, by an April 24, 2014 FAQ (click here to access). Among other requirements, block trades are subject to minimum thresholds and may only be entered into by so-called eligible contract participants and certain commodity trading advisors; must be executed at prices that are fair and reasonable; are subject to certain recordkeeping requirements; and must be reported within certain time frames. Block trades may only be executed between affiliated entities that have a separate and independent reason to enter into a trade and that are decided by separate and independent decision makers. Parties may not disclose the terms of a block trade to non-involved persons prior to a trade being publicly disclosed. IFUS has a separate prohibition against parties engaging in pre-execution discussions, and taking advantage of such information by trading. (Click here to access IFUS Pre-Execution Communication FAQ, question 3; click here to access “ICE Futures Fines Bank, FCM and Employee US $490,000 for Block Trade Mishandling” in the March 3, 2014 edition of Bridging the Week.)

  • CFTC Chairman Argues for Equivalent Treatment for US CCPs by the European Commission; EC and CFTC Commit to Continue Talking—That’s All for Now: In a presentation before a committee of the European Parliament last week, Commodity Futures Trading Commission chairman Timothy Massad argued that US clearinghouses effectively imposed similar margin requirements on their members as European clearinghouses. As a result, he said, the regulation of US clearinghouses should be deemed equivalent to the regulation of EU clearinghouses —at least regarding minimum margin requirements. European banks will be subject to putative capital requirements for exposure to US clearinghouses unless they are deemed to be subject to EU equivalent regulation; a determination is required by June 15, 2015, to avoid such consequence. According to Mr. Massad, although EU clearinghouses are required to use a two-day liquidation period to calculate clearing member margins, such margins are collected on a net (not a gross) basis. However, in the United States, said Mr. Massad, clearing member customer margins are collected on a one-day gross basis, and typically result in a collection of substantially greater total margin by the clearinghouses. In connection with house clearing members, where margin effectively is collected in both the European Union and the United States on a net basis, two-day margin ordinarily is greater than one-day margin, acknowledged Mr. Massad. However, while in the United States, clearing member house accounts include the clearing firm and all affiliates, in the European Union, affiliates are not included in the house environment but are included in the customer environment instead. As a result the difference between the amounts of total margins in house accounts at EU and US clearinghouses is less pronounced than might be expected. Although Mr. Massad did not prevail in his arguments at this time, he and Jonathan Hill, Commissioner for Financial Stability, Financial Services and Capital Markets Union acknowledged “[d]iscussions are constructive and progressing” and “have been mutually satisfactory on the issue of the ability for both sides to potentially defer to each other’s rules.” (Click here for further information in “Further Delays in Transatlantic Clearing Accord” in the May 8, 2015 edition of Corporate & Financial Weekly Digest by Katten Muchin Rosenman.)

My View: Ultimately the CFTC and EC will resolve their current debate regarding whether clearing member margin should be based on a two-day or a one-day liquidation period—given the differences in how margin is collected by US clearinghouses (gross basis) and EU clearinghouses (net basis). But there is another requirement for EU clearinghouses that is not currently mandated for US clearinghouses—that EU clearinghouses dedicate at least 25 percent of their capital requirements as skin in the game in their default waterfalls (ESMA had initially considered requiring 50 percent of clearinghouses’ capital requirement but settled at 25 percent; click here to access ESMA’s: “Final Report: Draft Technical Standards under the Regulation (EU) No 648/2012 of the European Parliament on OTC Derivatives, CCPs and Trade Repositories”). When, ultimately, compromises in approach are made to achieve a resolution of the debate whether US clearinghouses are equivalently regulated as EU clearinghouses, it will be interesting to see whether any amendments to approach are adopted in the United States or Europe regarding so-called skin in the game.

  • Where to Bring an Enforcement Action: the SEC’s Enforcement Division Issues Guidance Regarding Its Decision-Making: In a week when The Wall Street Journal reported that, since October 2004, the Securities and Exchange Commission prevailed against 90 percent of defendants in enforcement actions brought in its own administrative tribunals, as opposed to 69 percent in federal courts (click here to access the relevant article), the SEC’s Division of Enforcement published guidance regarding its approach to forum selection in contested actions. According to the Division, its primary consideration when it chooses a forum is to assess which venue “will best utilize the Commission’s limited resources to carry out its mission.” Although the Division provided no bright light tests, it indicated certain conditions that, if present, suggest it would prefer to use an administrative tribunal (as opposed to federal court) in a contested matter: where (1) the matter involves an SEC-registrant and charges of failure to supervise or causing another person’s violation –which only can be brought in an administrative forum; (2) there is a desire to bring an action more quickly; (3) the matter involves older conduct; or (4) the matter “is likely to raise unsettled and complex legal issues under the federal securities laws, or interpretation of the Commission’s rules.” The Division also acknowledged that the greater availability of pre-trial discovery in federal courts “may entail both costs and benefits, which should be weighed under the facts and circumstances of a case” and will influence its forum selection.
  • Broker-Dealer LPL Fined US $10 Million by FINRA for Oversight Failures Related to Complex Products Sales: LPL Financial LLC agreed to pay a fine of US $10 million to the Financial Industry Regulatory Authority for supervisory failures related to the sale of complex products, including non-traditional exchange-traded funds, certain variable annuity contracts and non-traded real estate investment trusts. According to FINRA, the firm’s supervisory lapses occurred because it failed to accompany its rapid expansion from 2007 to 2013 “with a concomitant dedication of sufficient resources to permit the Firm to meet its supervisory obligations.” FINRA claimed that, during this time period, LPL increased its number of licensed brokers from 8,322 to 17,601 and augmented its revenues from approximately US $2.28 billion to approximately US $ 4.05 billion. Other failures, alleged FINRA, included the firm’s failure to monitor the length of time non-traditional ETFs were held in customer accounts and to deliver prospectuses to customers in connection with such securities; selling variable annuities without, in some instances, disclosing surrender fees; and using a defective monitoring system that did excluded certain mutual fund switch transactions from supervisory review. Generally, said FINRA, there were “multiple deficiencies” in LPL’s monitoring systems for reviewing customer-trading activity, including failure to generate alerts for high-risk activity. The firm also failed to report certain trades to FINRA and the Municipal Securities Rulemaking Board, as required. In addition to its fine, LPL agreed to pay restitution to customers of approximately US $1.7 million.
     
  • IOSCO Consults on Sound Practices to Assess Credit Risk: The International Organization of Securities Commissions published a report proposing 13 “sound” practices for large financial firms to better assess their credit exposures, in order to reduce their reliance on credit ratings. According to IOSCO, during the 2008-2009 financial crisis, many large firms relied too often on credit ratings as an “unofficial ‘seal of approval’.” This exacerbated the financial crisis, claimed IOSCO. As a result, “reducing such overreliance and seeking to identify sound practices with regard to suitable alternative assessment methods should both increase investor protection and be beneficial for market integrity and financial stability,” said IOSCO. The alternative techniques recommended by IOSCO include (1) establishing an independent credit assessment function; (2) ensuring senior management involvement in implementation of a “robust” credit assessment process; (3) ensuring the credit assessment process is properly implemented and followed; (4) ensuring the firm’s governing committee is fully informed on the amount of credit risk to which the firm is exposed; and (5) including “a wide variety of qualitative measures into robust credit assessment processes in addition to quantitative measures.” Comments will be accepted by IOSCO through close of business July 8, 2015.

And even more briefly:

  • Cybersecurity and the Concentration of FCMs Subjects of Upcoming CFTC Market Risk Advisory Committee Meeting: The Commodity Futures Trading Commissions Market Risk Advisory Committee will next meet in June 2 in Washington, DC. The principal subjects to be discussed will be cybersecurity and the increased concentration of futures commission merchants.
     
  • ESMA and Other European Regulators Warn Risks to EU Financial Market Stability Have Increased: The Joint Committee of the European Supervisory Authorities issued its fifth report on its assessment of the EU financial system, and warned that “in the past six months, risks affecting the EU financial system have not change in substance, but have further intensified.” ESMA based its warning on its assessment of risks related to “broad macroeconomic conditions,” specifically low interest rates and the “search-for-yield behavior,” as well as political developments at EU and international levels. ESMA also expressed concern about (1) cost pressures at financial market entities reducing their potential willingness to maintain strong IT infrastructures and (2) cybersecurity risks. The Joint Committee consists of the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority.
     
  • CFTC Commissioner Bowen Says It’s Time to Consider DCO, DCM and SEF Governance: In a speech before the 2015 Compliance Conference of the Managed Funds Association, Commissioner Sharon Bowen argued that it was time for the Commission to finalize rules related to the governance of derivatives clearing organizations, designated contract markets and swap execution facilities. She claimed that finalizing rules on governance would help “deter rule-breaking.” According to Ms. Bowen, “[c]ulture comes from the top—when you have a strong, independent, and involved board of directors, it’s more likely that issues will be fixed before they become problems or cause a regulation or law to be broken.”
     
  • Nodal Clear Seeks Designation as CFTC DCO: The Commodity Futures Trading Commission is seeking public comments regarding the application of Nodal Clear, LLC to become registered as a derivatives clearing organization. Nodal Clear proposes to provide clearing services for energy contracts traded on the Nodal Exchange, LLC. Currently, LCH.Clearnet.Ltd clears Nodal Exchange contracts. Comments will be accepted by the CFTC through June 8, 2015.
     
  • ESMA Defines Commodity Derivatives to Ensure More Equivalent Application of EMIR: The European Securities and Markets Authority issued guidelines clarifying the definition of commodity derivatives under the Markets in Financial Instruments Directive. The purpose of the guidelines is to eliminate continued inconsistent application of the requirements of the European Market Infrastructure Regulation from country to country. Among other things, the guidelines clarify what is meant by “physically settled” and that forward contracts traded on a regulated market or a multilateral trading facility fall within the scope of MiFID I. (Click here for further information in “ESMA Releases Final Guidance on the Definition of Physically Settled Commodity Derivatives Under MiFID I” in the May 8, 2015 edition of Corporate & Financial Weekly Digest by Katten Muchin Rosenman.)
     
  • Office of Financial Research Says Concentration of Clearing Imperils CCP Clearing Effectiveness: Three staff members of the Office of Financial Research of the US Department of Treasury have issued a report claiming that, over time, large clearing members tend to dominate at clearinghouses, increasing the exposure of clearinghouses to their largest members. To counter such risk, the authors argued that clearinghouses should factor a concentration charge into the margin requirements of clearing members. The authors also proposed that clearinghouses, (1) when conducting their annual test of their default management processes regarding the default of an individual member, should consider the action of other clearinghouses affected by the same member’s default; and (2) when conducting stress tests, to include among each stress scenario an accounting for the actions of other clearinghouses.

And finally:

  • An Article Published for the MFA: Click here to access a copy of a recent article prepared for the Managed Futures Association's Compliance 2015 conference on May 5, 2015 entitled "Miscellaneous Current Compliance and Enforcement Issues for CTAs and CPOs." The article includes information regarding National Futures Association Bylaw 1101 (including recent Commodity Futures Trading Commission initiatives regarding commodity pool operator authority delegation), CPO quarterly annual reports, NFA CPO and commodity trading advisor examination priorities, disruptive trading practices, exchanges for related positions and block trade transactions, and position limits.

For more information, see:

Broker-Dealer LPL Fined US $10 Million by FINRA for Oversight Failures Related to Complex Products Sales:
http://disciplinaryactions.finra.org/Search/ViewDocument/48016

CFTC Chairman Argues for Equivalent Treatment for US CCPs by the European Commission; EC and CFTC Commit to Continue Talking—That’s All for Now:
Chairman Massad Speech:
http://www.cftc.gov/ucm/groups/public/@newsroom/documents/speechandtestimony/opamassad-20.pdf
Joint CFTC EC Statement:
http://www.cftc.gov/PressRoom/SpeechesTestimony/massadstatement050715

CFTC Commissioner Bowen Says It’s Time to Consider DCO, DCM and SEF Governance:
http://www.cftc.gov/PressRoom/SpeechesTestimony/opabowen-4

Cybersecurity and the Concentration of FCMs Subjects of Upcoming CFTC Market Risk Advisory Committee Meeting:
http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2015-10448a.pdf

ESMA Defines Commodity Derivatives to Ensure More Equivalent Application of EMIR:
http://www.esma.europa.eu/system/files/2015-05-06_final_guidelines_c6_and_7.pdf

ESMA and Other European Regulators Warn Risks to EU Financial Market Stability Have Increased:
http://www.esma.europa.eu/system/files/jc_2015_007_jc_report_on_risks_and_vulnerabilities_in_the_eu_financial_system.pdf

ICE Futures U.S. Fines Member US $200,000 for Problematic Block Trades:
/ckfinder/userfiles/files/EOX%20ICE%20Futures%20US.jpeg

IOSCO Consults on Sound Practices to Assess Credit Risk:
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD486.pdf

Money Service Businesses for Second Largest Virtual Currency Fined for AML Deficiencies; Bitcoin Exchange Gets First NY License as Trust Company:
Department of Justice:
http://www.justice.gov/opa/pr/ripple-labs-inc-resolves-criminal-investigation
FinCEN:
http://www.fincen.gov/news_room/nr/pdf/Ripple_Assessment.pdf
http://www.fincen.gov/news_room/nr/pdf/Ripple_Facts.pdf
http://www.fincen.gov/news_room/nr/pdf/Ripple_Remedial_Measures.pdf
New York:
http://www.dfs.ny.gov/about/press2015/pr1505071.htm

Nodal Clear Seeks Designation as CFTC DCO:
http://www.cftc.gov/PressRoom/PressReleases/pr7172-15

See also, Description of Proposed Activities:
http://www.cftc.gov/ucm/groups/public/@otherif/documents/ifdocs/nodalcleardcoappexa-3.pdf

Office of Financial Research Says Concentration of Clearing Imperils CCP Clearing Effectiveness:
http://financialresearch.gov/working-papers/files/OFRwp-2015-07_Hidden-Illiquidity-with-Multiple-Central-Counterparties.pdf

SEC Approves Larger Tick Size Pilot for Small Companies; Study Suggests Larger Tick Sizes May Help HFTs and Not Market Quality:

OFR Report:
http://financialresearch.gov/working-papers/files/OFRwp-2015-08_Systemic-Risk-The-Dynamics-under-Central-Clearing.pdf
SEC Order:
http://www.sec.gov/rules/sro/nms/2015/34-74892.pdf

Two Traders Subject of CME Summary Suspension for Alleged Spoofing Sued by CFTC Too:
http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfkharacomplaint050515.pdf

Where to Bring an Enforcement Action: the SEC’s Enforcement Division Issues Guidance Regarding Its Decision-Making:
http://www.sec.gov/divisions/enforce/enforcement-approach-forum-selection-contested-actions.pdf

The information in this article is for informational purposes only and is derived from sources believed to be reliable as of May 9, 2015. No representation or warranty is made regarding the accuracy of any statement or information in this article. Also, the information in this article is not intended as a substitute for legal counsel, and is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The impact of the law for any particular situation depends on a variety of factors; therefore, readers of this article should not act upon any information in the article without seeking professional legal counsel. Katten Muchin Rosenman LLP may represent one or more entities mentioned in this article. Quotations attributable to speeches are from published remarks and may not reflect statements actually made.


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