The international derivatives market The CME Group has published a notice of disciplinary measures against Morgan Stanley & Co. LLC.
Pursuant to a settlement offer in which Morgan Stanley neither admitted nor denied the rule violations or the factual findings underlying the penalty, on April 17, 2024, a NEX SEF hearing panel found that between January 2021 and May 2021, Morgan Stanley Stanley failed to adequately supervise an employee in his NEX SEF transactions.
Specifically, a Morgan Stanley trader executed self-matching trades in the NEX SEF for the purpose of transferring positions between Morgan Stanley’s books under his control. The trader entered the contrarian orders into the front-end trading system and received messages from Morgan Stanley’s intercompany transfer system, which incorrectly reported that the trades were internal.
Due to failures in Morgan Stanley’s surveillance and supervision, the trader continued to execute self-matching trades in Indian Rupee, Indonesian Rupiah, Korean Won, Malaysian Ringgit and Taiwan Dollar undeliverables on the NEX SEF for several months, including after The NEX SEF contacted Morgan Stanley regarding this transaction.
The panel found that, as a result, Morgan Stanley violated Rule 407(h) of the NEX SEF (legacy).
Under the settlement offer, the commission ordered Morgan Stanley to pay a $90,000 fine.