On Sept. 28, 2018, the Commodity Futures Trading Commission filed a civil enforcement action against EOX Holdings LLC, an introducing broker, and one of its registered associated persons, Andrew Gizienski. The CFTC’s complaint, which charges that EOX Holdings and Gizienski misused material, nonpublic information in connection with block trades of energy contracts on the ICE Futures U.S. exchange, represents the latest assertion of CFTC jurisdiction over the relatively new concept of illegal insider trading in the commodity futures, options and swaps markets.
More importantly, on that same day, the CFTC also announced the formation of a special insider trading task force within the CFTC’s Division of Enforcement. The new Insider Trading and Information Protection Task Force aims to identify incidents of potential insider trading in the commodity derivatives markets and to bring charges for illegal insider trading. It is a national effort that draws on several CFTC offices for personnel and support.
Taken together, these steps make it clear that the CFTC is actively trying to expand the scope of its traditional enforcement role and to nurture the growth of traditional insider trading principles in the commodity derivatives markets. The fact that the CFTC is voluntarily undertaking to grow its capabilities in this area, at a time when its overall budget is seen by many observers as not being sufficient to support its growing scope of overall responsibility, only underscores the agency’s determination. Managers that actively trade in this space should ensure that they understand the scope of the CFTC’s new role and that they address the various risks raised by their trading and investment strategies.
To read more about the CFTC’s increasing insider trading enforcement efforts and what the implications are for private fund managers, click here.