Judge Rejects TFS-ICAP Motions to Dismiss FX Fraud Charges

A federal judge refused to dismiss a lawsuit filed by the Commodity Futures Trading Commission (CFTC CFTC The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss Read this Term) against interdealer brokers TFS-ICAP LLC and TFS-ICAP Ltd, court documents show.

A legal battle is being fought in the New York Southern District Court as the CFTC accuses TFS-ICAP of advertising fake bids, offers, and trades in the foreign exchange options market. The regulator says that the practices, known as “flying prices” and “printing trades,” were a core part of TFS-ICAP’s broking business.

‘Flying’ involves a broker communicating its clients that it has bids or offers to create a false sense of Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term, while ‘printing’ involves claiming the trades have been executed, but both practices are, in fact, fictitious.

Both the United Kingdom and the United States offices of TFS-ICAP were liable for showing bogus prices to spur more trades, enabling the company to collect additional commissions.

The watchdog also stated that a review of email and other communications revealed that senior managers at TFS-ICAP, including CEO Ian Dibb, either encouraged improper conduct or allowed the practices to continue.

TFS-ICAP denies CFTC authority

TFS-ICAP and TFS-ICAP, in their reaction to the CFTC, responded to fraud counts, and requested the court to dismiss all the claims because they were unfounded. The brokerage firm claimed the US FX options market was largely unregulated before 2013, but that changed after the Dodd-Frank financial reform law allowed the CFTC to assume new oversight powers.

However, Judge Victor Marrero rejected motions to dismiss those charges against the inter-dealer brokers.

According to court documents, the judge was satisfied with the CFTC's explanation of the limits of the relief it seeks from TFS-ICAP Ltd.

For similar reasons, and for the reasons stated in the Dibb order earlier this month, the court found both the allegations of flown prices and printed trades are sufficient "to give fair notice of a claim and the grounds upon which it rests."

“The allegation in Paragraph 96 includes details regarding a flown price on April 4, 2014. Each of these allegations establishes who was acting, what happened, when it happened, and how. These details provide sufficient notice of the claim and enough information for the corporate defendants to respond,” it further explains.

This article was updated to reflect that TFS-ICAP is a business that is wholly owned by Tradition. TFS-ICAP is not associated with UK broker dealer TP ICAP.