September 27, 2018

CFTC Charges Futures Trader with Cross-Exchange Manipulation 

— The Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Davis Ramsey, a Florida-based futures trader, for employing a manipulative scheme to influence the prices of certain futures contracts traded on the Chicago Mercantile Exchange, Inc. (CME) and Commodity Exchange, Inc. (COMEX), both Designated Contract Markets operated by the CME Group, Inc. (CME Group), to impact the outcome of related binary contracts traded on the North American Derivatives Exchange (Nadex). 

 CFTC Director of Enforcement Comments

James McDonald, CFTC Director of Enforcement, commented: “This action highlights the CFTC’s ability to detect and prosecute manipulative conduct — even when that conduct stretches across different markets and different exchanges.  I would like to thank the CME Group and Nadex for their assistance in this case.  This case highlights again that, together, we will protect our markets from all types of manipulative activities.” 

Summary of Order

The Order requires Ramsey to pay a $325,000 civil monetary penalty, $250,636.25 in disgorgement, and prohibits him, for a period of five years from the date of the Order, from: 1) entering into any transactions involving commodity interests; 2) having any commodity interests traded on his behalf; 3) controlling or directing the trading for or on behalf of any other person or entity in any account involving commodity interests; and 4) soliciting, receiving, or accepting any funds from any person for the purpose of purchasing or selling any commodity interests. The Order also permanently prohibits Ramsey from trading on Nadex and requires him to cease and desist from further violations of the Commodity Exchange Act (CEA) and Commission Regulations (Regulations), as charged. 

According to the Order, from at least April 2015 through May 2017, Ramsey employed a manipulative strategy in which he engaged in transactions in the futures market to benefit positions he held in certain binary contracts traded on Nadex, a registered Designated Contract Market and Derivatives Clearing Organization.  On multiple occasions, Ramsey took a position in one or more binary contracts for which the outcome at expiration was determined based on the price of certain futures contracts that were traded on either COMEX or CME, each a Designated Contract Market operated by CME Group.  Ramsey then placed trades in the relevant futures contracts with the intent and in a manner designed to impact the price of those futures contracts to achieve his further objective, which was to influence the settlement of the binary contracts in his favor and benefit his position on Nadex.  

As detailed in the Order, on at least one occasion, in connection with this strategy and with the intent to influence market prices, Ramsey caused the S&P e-mini 500 futures contract on CME to be traded at an artificial price.  The Order finds that, by such conduct, Ramsey attempted to, and did, engage in manipulation in violation of the CEA and Regulations.

The CFTC’s investigation was conducted in conjunction with related inquiries by CME Group and Nadex.  Today, CME Group issued a Notice of Disciplinary Action against Ramsey (CME NDA) and, on September 26, 2018, a Hearing Officer for Nadex approved a settlement agreement with Ramsey (Nadex Settlement).  The CME NDA and the Nadex Settlement arose out of the same misconduct that is the subject of the CFTC’s Order. The CME NDA orders Ramsey to pay a fine of $135,000 and further orders that Ramsey’s access to all CME Group trading floors and direct and indirect access to all electronic trading and clearing platforms owned or controlled by CME Group will be suspended for a period of five years.  The Nadex Settlement requires Ramsey to pay $250,636.25 in disgorgement and a fine of $140,000, and further provides that Ramsey will be permanently barred from membership or trading on Nadex. 

CFTC Division of Enforcement staff members responsible for this case are Alben Weinstein, Jordan Grimm, Lara Turcik, David MacGregor, Lenel Hickson, Jr., and Manal M. Sultan.