Alleged improper trading on Winnipeg’s commodity exchange will cost an ex-manager of brokerage Refco’s Winnipeg office a 12-year suspension and $35,000 fine.
ICE Futures Canada announced last week that it had imposed the penalty on Paul Erickson, who co-managed Refco’s Winnipeg office up to the end of January 2006, and co-managed the same office for what’s now MF Global Canada up until early May that year.
In a statement last week, the former Winnipeg Commodity Exchange announced Erickson had admitted to liability and responsibility for a long list of violations of ICE rules and Manitoba’s Commodity Futures Act between March 2005 and February 2006, including:
- engaging in pre-execution communications on 29 occasions;
- disclosing limit orders on 27 occasions;
- engaging in pre-arranged trading on six occasions;
- trading on non-public information on six occasions;
- completing matched trades in a manner not authorized by ICE rules on two occasions;
- disclosing confidential client information on 15 occasions; and
- conspiring with a trader at a different company, to make “false and/or misleading” statements to the ICE concerning their trading activities.
ICE said the activities of Erickson and another unnamed trader, referred to in the exchange’s statement only as “Trader ‘P’,” “removed transparency and competitive processes from the market.”
Their conduct, ICE said, “violated the rules, the Act, and the spirit of the rules, and caused harm to the market and to market participants.”
Steve Teller, manager of ICE Futures Canada’s regulatory division, said Monday he couldn’t comment on the specifics of the exchange’s claims against either Erickson or Trader “P.”
Nor would Teller comment on the identity of Trader “P,” including whether the unnamed person had already been disciplined by the exchange or whether disciplinary action was still to come.
The suspension and fine follow an investigation in March 2006 in which the ICE’s regulatory division asked MF Global to hand over 49 days’ worth of phone recordings relating to trading activity by Erickson and Trader “P.”
Regulators spent “several months” analyzing and transcribing those recordings and conducting “under-oath interviews” with Erickson and other unnamed individuals, ICE said.
The investigation “evidenced that Erickson and Trader ‘P’ together and separately, were repeatedly and regularly engaging in pre-execution communications, disclosing confidential client information, disclosing limit order information, engaging in pre-arranged trading, entering into matched trading in a manner contrary to the rules and trading on non-public material information,” ICE said.
Erickson, who had traded on the WCE and ICE since 1985, had worked for the commodities brokerage wing of the ill-fated U.S. financial firm Refco since 2002. He was also registered with the Manitoba Securities Commission as a “salesperson,” ICE said.
The 12-year suspension blocks him from ICE participant status or from working for a registered ICE participant “in any capacity.” The $35,000 fine is to be paid as a “contribution towards the costs of the investigation.”
Refco filed for bankruptcy in October 2005, a week after it revealed its former CEO had hid US$430 million in debt. The company’s bankruptcy is considered one of the largest in U.S. history.
U.K. financial firm Man Group plc bought Refco’s shares in early 2006, after which Refco’s Canadian futures business became Man Financial Canada, and later was renamed MF Global Canada.
According to ICE, MF Global fired Erickson in late September 2006 for “reasons unrelated” to the violations in question.
The Winnipeg Commodity Exchange, as it was known until the end of 2007, became ICE Futures Canada after it was bought by Atlanta-based IntercontinentalEchange (ICE). The WCE had moved to a fully-electronic trading platform in 2004 and moved its trading to ICE’s platform in late 2007.