Release Number 8800-23
CFTC Orders Goldman Sachs to Pay $3 Million for Supervision Failures and Material Omissions in a Letter to the CFTC’s Division of Enforcement
September 29, 2023
Washington, D.C. — The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against Goldman Sachs & Co. LLC for failure to maintain adequate supervisory systems and controls to ensure its customers’ trading was not disruptive and for material omissions in a letter to the CFTC’s Division of Enforcement (DOE).
The CFTC order requires Goldman to pay a $3 million civil monetary penalty and cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged.
“The CFTC takes very seriously the role of registrants’ supervisory obligations to detect and prevent disruptive trading and to maintain the integrity of the futures markets,” said Director of Enforcement Ian McGinley. “This settlement, and the significant civil monetary penalty here, also reflects the CFTC’s expectation that responses to Division inquiries be accurate and complete.”
The order finds Goldman did not maintain an adequate supervisory system to ensure its customer’s trading on December 29, 2017 in the ICE Futures Europe (ICE) Low Sulphur Gasoil futures contract February 2018/December 2018 calendar spread was not disruptive. Specifically, the order finds Goldman’s Volatility Awareness Control (VAC)—a preventative control to suspend potentially disruptive trading when volatility thresholds were exceeded—malfunctioned and did not suspend the trading on December 29, 2017 as it should have. Additionally, the order finds Goldman’s post-trade surveillance, which was designed to detect potential intentional or reckless efforts to influence the daily settlement price in futures contracts, did not use the correct settlement period for the ICE Gasoil futures contract on December 29, 2017 and thus was not properly surveilling for potential disruptive trading activity. Thus, Goldman did not maintain an adequate supervisory system with respect to disruptive trading in violation of CFTC Regulation 166.3.
The order further finds Goldman omitted material information regarding the VAC’s malfunction in its response to a DOE request for, among other things, a description of the method by which Goldman’s customer’s orders were executed, including the reasons Goldman executed its customer’s orders in the fashion that it did and a full description of any algorithms used. Goldman did not make any mention of Goldman’s VAC that should have—but did not—suspend the operation of Goldman’s trading algorithm on December 29, 2017. The order finds Goldman reasonably should have known that its omission of that information rendered its August 6, 2018 letter to DOE materially misleading, in violation of Section 6(c)(2) of the CEA.
The CFTC acknowledges and appreciates the assistance of the United Kingdom Financial Conduct Authority for its assistance in this matter.
The Division of Enforcement staff responsible for this matter are W. Derek Shakabpa, Elizabeth C. Brennan, Trevor Kokal, R. Stephen Painter, Jr., Lenel Hickson, Jr., and Manal M. Sultan.