A pair of inter-dealer brokers is paying a combined US$37.5 million to settle allegations of misconduct in the foreign exchange (FX) options market.
The U.S. Commodity Futures Trading Commission (CFTC) settled charges with a pair of firms, BGC Financial LP and GFI Securities LLC, that will see them pay US$25 million in penalties (US$15 million and US$10 million, respectively) after finding that the firms’ brokers “made false representations that certain bids and offers were executable and that certain trades had occurred.”
The CFTC said that the firms’ brokers posted phantom bids and offers on their electronic trading platform, and “communicated fake trades” to their clients, in an effort to create an illusion of liquidity and/or tighter spreads to induce trading from clients.
Alongside the regulatory settlement, the firms also agreed to pay US$12.5 million to New York’s attorney general’s office for their violations of state law, stemming from brokers’ “fraudulent practices” in the FX options market. BGC will pay US$7.5 million in penalties; GFI, US$5 million.
The firms also agreed to immediately implement remedial procedures and bolster their internal controls.