CME Fines Barclays Capital $25,000 Over Customer Liquidation Terms

CME Group fined Barclays Capital $25,000 over a violation related to restrictions on its discretion to liquidate customer trading positions.

Key Insights

  • CME Group fined Barclays Capital Inc $25,000 for violating rules governing discretion over liquidating customer trading positions
  • The violation stemmed from contractual terms that improperly restricted when Barclays could unwind certain customer positions
  • Barclays corrected the violation by updating customer agreements to comply with CME’s liquidation discretion rules

CHICAGO (MarketsXplora) – CME Group Inc, the world’s biggest derivatives marketplace operator, has fined Barclays Capital Inc $25,000 over a rule breach relating to restrictions on liquidating customer trading positions, the exchange said on Wednesday.

The disciplinary action stems from Barclays Capital contractually agreeing to terms that impeded its full discretion over the timing and circumstances of unwinding certain positions, violating CME’s NYMEX exchange rulebook, according to the order.

CME’s Clearing House Risk Committee found that Barclays Capital, the U.S. broker-dealer arm of Barclays Plc, breached NYMEX Rule 930.K through the customer agreement clause.

In a settlement where it neither admitted nor denied the rule violation, Barclays Capital paid the $25,000 penalty as part of the order, which takes effect on March 15, 2024.

The order states Barclays Capital has since corrected the violation by updating its customer documentation to comply with CME Group exchange rules governing liquidation discretion.

CME operates global derivatives bourses including the Chicago Mercantile Exchange and the New York Mercantile Exchange, where it oversees compliance and enforces standards for its members firms and participants, including banks and brokers.

Disciplinary actions and fines are routinely published by the exchange, which settles thousands of cases each year ranging from technical violations to substantive conduct breaches.

It was not immediately clear which type of customer agreement or specific products the liquidation discretion clause covered at Barclays Capital.

Major banks like Barclays, through their broker-dealer arms, serve as clearing members for CME Group’s markets, providing access to its derivatives trading venues.

As such, they must adhere to CME Group’s rules over maintaining sufficient funds, managing risks to the broader clearing system, as well as liquidation protocols during customer defaults or other crises.

The modest $25,000 penalty size suggests the Barclays Capital violation, while in breach of the rules, was relatively minor in scope and limited.

A spokesperson for Barclays in New York declined to comment on the specifics of the disciplinary case.

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