Nasdaq Futures, a former designated contract market (DCM), has been fined $22 million by the Commodity Futures Trading Commission (CFTC) for failing to disclose trading incentives and misleading the regulator, according to Finextra.
Between July 2015 and July 2018, Nasdaq Futures operated a “Designated Market Maker” (DMM) program, which was intended to offer a fixed monthly stipend to market makers. However, the company also provided additional incentives based on trading volumes, a detail not disclosed in accordance with the Commodity Exchange Act (CEA) and CFTC regulations. This undisclosed volume-based incentive created discrepancies in reports submitted to the CFTC, which Nasdaq Futures initially denied.
The CFTC found that Nasdaq Futures’ non-disclosure and provision of false information violated several Core Principles critical to the operation of CFTC-designated exchanges. Additionally, the company failed to consult with three DMM program participants about suspicious trading activities, contrary to recommendations from its regulatory service provider.
Ian McGinley, Director of Enforcement at the CFTC, highlighted the importance of transparency and adherence to regulatory principles. “Nasdaq Futures, Inc.’s actions represent serious breaches of its disclosure obligations and the Core Principles mandated for CFTC-designated exchanges,” McGinley said.
The substantial fine serves as a warning to all regulated entities about the importance of full compliance with disclosure requirements to maintain market transparency and investor confidence.
The CFTC also acknowledged the National Futures Association’s role in addressing the issue, emphasizing the importance of collaborative efforts to uphold market integrity.
