BMO Nesbitt Burns Inc. and a former trader are being sanctioned by the Bourse de Montréal Inc. (MX) for alleged front running and other trading rule violations.
Following a hearing, a disciplinary committee of the MX found that the investment dealer and one of its former traders, Franco Carelli, violated the exchange’s rules by engaging in front running in government bond futures back in 2019, among other things.
According to a complaint filed by the regulatory division of the exchange, on March 19 and May 31, 2019, the trader and the firm “took advantage of a customer’s order by trading ahead of it” and trading based on non-public information concerning pending transactions.
It also found that the firm breached several other requirements, as trading on those two days violated best execution requirements, order priority rules and the firm’s supervisory obligations, by not having adequate surveillance to detect possible front running.
The committee acquitted the firm of one allegation — that it breached order identification requirements.
Now, the committee has imposed sanctions in the case, accepting a joint submission that will see the firm fined $160,000 and ordered to pay $114,196 in costs. Carelli was fined $15,000.
In its decision, the committee noted that the misconduct was relatively limited (involving seven orders on two trading days), that the firm reported some (but not all) of the alleged violations, and that it took corrective action, including recalibrating its trading oversight systems to detect possible front running.