CME Group Sued Over Confidential Trade Data Leak

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CME Group Sued Over Confidential Trade Data Leak
By CME Group/Henry Delforn/Allan Schoenberg (CME Group) [CC BY-SA 3.0], via Wikimedia Commons

The CME Group Inc (NASDAQ:CME) was on Thursday sued by the Commodity Futures Trading Commission, the CFTC, for alleged leaking confidential trading information to an external broker. The suit not only covers CME, but it is also directed towards 2 former CME employees, Christopher Curtin and William Brynes. This incident is reminiscent of a somewhat similar incident that stalked Peregrine Asset Management mid last year.

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CME Group Sued Over Confidential Trade Data Leak

The CME suit involves activity between 2008 and 2010 on the New York Mercantile Exchange, also known as the Nymex. It particularly centers on Brynes and Curtin, both of whom are New York residents; alleging that the two funneled confidential and sensitive information to a favored external broker. According to the CFTC, the kind of information that was leaked  includes non public information such as the identity of traders involved in particular trades, the brokers involved and even as far as the strategies employed in those trades. In addition, the CFTC maintains that the external broker was helped by the two former CME employers at least 76 times.

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Under the suit, the CFTC asked the court to charge each defendant a penalty of not less than $130,000 per incident, insisting that the two had not only broken CFTC rules but had also broken federal law. Given that there are an alleged 76 plus incidents, the two defendants could end up forking out more than $10 million if found guilty.

CME and CFTC issue contradictory statements

As expected, CME Group Inc (NASDAQ:CME) proceeded to deny the allegations in a swift and precise fashion. It denied CFTC’s allegations and further argued that the leaked information did not in any way influence the markets.  It went on to say that the two workers were helping the third party broker get business leads and not to manipulate trading, as alleged by the CFTC. The CME Group further went on to add that it fired the two employees immediately after it caught wind of their ‘improper activities’.

“The CFTC court action announced today is disappointing because it relates to incidents that CME Group Inc (NASDAQ:CME) has already addressed and handled appropriately, and involved no harm to any customer or the markets,” said the CME in a statement.

While the CME Group Inc (NASDAQ:CME) was quick to deny the charges, the CFTC gave a whole different story. In addition to reiterating the accusations, it argued that the CME did not follow up on the first complaint which was lodged against Brynes in 2009. The CFTC further alleges that the CME only fired Brynes after a second complaint was lodged in 2010. Furthermore, it contends that Curtin voluntary resigned from his post in 2009, challenging CME’s statement which says that both of the workers were fired at the same time.

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