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ICE suspends, fines ex-Refco trader

Alleged improper trading on Winnipeg’s commodity exchange will cost a former trader from brokerage Refco’s Winnipeg office a 10-year suspension and a $20,000 fine.

ICE Futures Canada said last week it had imposed those penalties on trader Wayne Palmer, who worked for Refco’s Winnipeg office from December 2004 until late September 2006, by which time it was called Man Financial Canada (now MF Global Canada).

In a statement last week, the former Winnipeg Commodity Exchange said Palmer 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 32 occasions;
  • disclosing limit orders on 23 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 under ICE rules on three occasions; and
  • disclosing confidential client information on 18 occasions.

ICE regulatory division staff spent “several months” going over 49 days of phone recordings it requested in March 2006, pertaining to trading activity by Palmer and another trader, who ICE last week referred to only as “Trader ‘E’.”

The recordings, electronic order data from ICE’s trading system and a numebr of under-oath interviews were evidence that Palmer and “Trader ‘E'” were “together and separately… 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.

Those activities, ICE said, “removed transparency and competitive processes from the market” and “generally caused harm to the market and to market participants.”

Palmer had worked as an independent trader and broker on the Winnipeg exchange floor since 1978 and came to work for the commodities brokerage wing of ill-fated U.S. financial firm Refco in late 2004. The company fired him for “reasons unrelated” to the violations in question, ICE said.

ICE said the 10-year suspension blocks Palmer from ICE participant status or from working for any registered ICE participant “in any capacity” involving or relating to the exchange and/or its clearinghouse.

The $20,000 fine is to be paid “as a contribution towards the costs of the investigation,” ICE said.

Palmer’s suspension and fine follow a 12-year suspension and $35,000 fine imposed in late August against trader Paul Erickson over a similar list of violations relating to his trading activity and that of an unnamed “Trader ‘P’.”

Erickson, who had worked for Refco’s Winnipeg office since 2002, co-managed the 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. ICE said Erickson had also been fired from that company in September 2006 for unrelated reasons.

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.

The Winnipeg Commodity Exchange, as it was known until the end of 2007, became ICE Futures Canada after it was bought by Atlanta-based IntercontinentalExchange (ICE). The WCE had moved to a fully-electronic trading platform in 2004 and moved its trading to ICE’s platform in late 2007.

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