CFTC SETTLES "BUCKETED ORDRS" CHARGES AGAINST TRADERS

FROM: COMMODITY FUTURES TRADING COMMISSION
CFTC Suspends Registrations of Chicago Mercantile Exchange Traders Christopher Foufas, William Kerstein, and Maksim Baron for Unlawful S&P 500 Trading

Washington DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued orders filing and settling charges against Christopher T. Foufas and Maksim Baron of Chicago, Ill., and William K. Kerstein of Riverwoods, Ill., all registered floor brokers in the Chicago Mercantile Exchange’s (CME) Standard & Poor’s 500 Stock Price Index futures contract (S&P 500) trading pit.

The CFTC order entered against Foufas finds that he indirectly bucketed his customers’ orders on at least 11 occasions between May 2009 and October 2010. On each of these occasions, Foufas, while filling customers’ orders in the S&P 500 trading pit, indirectly took the opposite side of his customers’ orders for his own account through noncompetitive round-turn trades with accommodating traders, according to the order. This practice permitted Foufas to establish a position for his own account without competitive execution, according to the order.

The CFTC orders entered against Kerstein and Baron find that Kerstein and Baron accommodated another broker in taking the opposite side of his customer orders into his own account on seven and four of these occasions, respectively.

The CFTC orders require Foufas, Kerstein, and Baron to pay civil monetary penalties of $75,000, $50,000, and $20,000, respectively. The orders also suspend Foufas’ and Baron’s floor registrations for two months and Kerstein’s floor registration for one month, removing them from the trading floor. The order also prohibits Foufas from filling or executing orders for customers for 18 months. The orders require all three traders to cease and desist from further violations of the Commodity Exchange Act and CFTC regulations, as charged.

The CFTC’s Enforcement Division thanks the staff of the CME’s Market Regulation Department for their assistance.

CFTC Division of Enforcement staff members responsible for this case are Jon J. Kramer, Mary Beth Spear, Ava M. Gould, Elizabeth M. Streit, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner. Meghan M. Wise of the CFTC’s Division of Market Oversight also contributed to this matter.