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Former Delta Air fuel executive banned from CME markets
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Former Delta Air fuel executive banned from CME markets

  #1 (permalink)
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Former Delta Air fuel executive banned from CME markets

Former Delta Air fuel executive, wife banned from CME markets | Reuters

"
Former Delta Air fuel executive, wife banned from CME markets
CHICAGO, June 13 | By Tom Polansek

CME Group on Monday banned a former Delta Air Lines fuel executive for using accounts owned by his wife to front-run trades subsequently entered in an account controlled by the carrier and for breaking other exchange rules.

The futures exchange operator also banned the executive's wife for taking part in the scheme.

The couple, Jon and Ivonne Ruggles, could not immediately be reached for comment.

In addition to the lifetime bans, the exchange operator ordered Jon Ruggles to disgorge profits of $2.8 million and pay a $300,000 fine.

Jon Ruggles worked for Delta, the No. 2 U.S. carrier by passenger traffic, from early 2011 to December 2012, according to the airline. It said he was a vice president of fuel management.

CME, in a disciplinary notice, said he "repeatedly abused his trading discretion given to him by his employer for personal gain" from April 2012 to December 2012.

During that time, he intentionally traded his employer's account opposite two personal accounts owned by his wife "to obtain a favorable execution price for Ivonne's orders in blatant violation of exchange rules," according to the notice.

CME rules prohibit traders from executing an order for their own benefit while in possession of an order from someone else for a transaction in the same market. The company also bars traders from disclosing other people's orders to anyone aside from designated regulatory officials.

According to the disciplinary notice, the chief financial officer of Ruggles' employer said in an affidavit that he violated company policies prohibiting employees from using information on its commodity trades to benefit anyone other than the company. The notice did not identify the employer.

The company considers such information to be confidential and proprietary, the notice said.

"Delta has the highest standards of ethics and expects all of its employees to maintain those standards," company spokesman Trebor Banstetter said.

CME, which owns the New York Mercantile Exchange and other markets, said it requested that the couple appear for interviews and both declined through legal counsel. (Reporting by Tom Polansek; Editing by Meredith Mazzilli)
"

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  #2 (permalink)
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What law was broken here?

For a long time the departments in large companies that dealt in futures to secure prices have become profit centres.

In other words, they moved from pure hedging to speculation.

So given it's completely fine for Delta to have a group of people speculating on the markets, they themselves could front run their own hedging activities.

So what is the issue with this?

Look at companies buying order flow and reacting to that. Seems the same thing to me.

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The guy aided by his wife cheated. He had access to Delta's trading accounts somehow as an ex-VP. So he could probably see the company's limit orders on crude and frontrun accordingly on his wife's account. Similar to insider trading. CME claims rules were broken. And crude is much more important to an airliner such as Delta as it's their main expense, i.e. a legitimate industry reason for crude futures to exist.


Last edited by Cloudy; June 17th, 2016 at 04:04 PM.
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What I don't get is... frontrunning this way is 'not allowed' but when HFTs do it then it's okay?

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I think this isolated case was far easier to root out as simple insider trading. HFT , imo, seems to have some kind of general corrupt support structure that has allowed it to continue to exist.

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Cloudy View Post
I think this isolated case was far easier to root out as simple insider trading. HFT , imo, seems to have some kind of general corrupt support structure that has allowed it to continue to exist.

The corrupt support structure is represented by the greedy exchanges that close both eyes because HFT means extra volume and lots of it.

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HFTs Lose: IEX Granted Exchange Status As SEC Says The Speed Race Is Over | Zero Hedge

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