Key Takeaways
- • The CFTC issued a settlement order against BBL Commodities LP on March 28, 2023, imposing a $400,000 civil monetary penalty for failures in supervisory systems designed to detect and deter disruptive trading.
- • BBL, a New York-based commodity trading advisor (CTA) and commodity pool operator (CPO), lacked adequate written policies and procedures to address potentially disruptive trading from December 2017 through the settlement date.
- • The violation centered on December 29, 2017 trading activity in Gasoil futures calendar spreads on ICE Futures Europe, where BBL executed large transactions during the settlement window despite executing broker concerns about liquidity; ICE determined the trading to be disruptive, reckless, and disorderly.
- • BBL's supervisory deficiencies included the absence of written guidance on assessing disruptive trading impact, liquidity assessment, appropriate trading during settlement periods, and mitigation of order disruption; supervisors actively monitored the market disruption but issued continued "keep buying" instructions.
- • The order requires BBL to cease and desist from further supervision violations, establishing regulatory expectations for CTAs and CPOs regarding market conduct oversight and internal controls.
Summary
The Commodity Futures Trading Commission settled enforcement charges against BBL Commodities LP, a registered New York-based commodity trading advisor and commodity pool operator, requiring the firm to pay a $400,000 civil monetary penalty for supervisory failures spanning from at least December 2017 through the settlement. The CFTC's order, issued March 28, 2023 (Release Number 8681-23), found that BBL violated Regulation 166.3 by failing to establish and implement an adequate supervisory system to detect whether employees were engaging in disruptive trading or to deter such conduct.
The specific violation originated from trading activity on December 29, 2017, involving Gasoil futures calendar spreads (Feb18/Dec18 contracts) on ICE Futures Europe. BBL instructed its executing broker, Goldman Sachs, to execute a series of large transactions—including the largest order ever submitted by BBL for that product—within the settlement window. Despite the executing broker raising liquidity concerns and questioning whether execution should begin before the settlement window, BBL persisted with its instructions. During the trading sequence, BBL's supervisor actively monitored the market disruption, including observable price spikes, yet issued explicit instructions to "keep buying." ICE Futures Europe subsequently determined the timing and quantity of orders to be disruptive, reckless, and disorderly, culminating in disciplinary action against Goldman Sachs in October 2019.
The CFTC's order detailed systemic deficiencies in BBL's policies and procedures: the firm lacked written protocols specifically addressing potentially disruptive trading, provided no guidance to staff on assessing the disruptive impact of orders, contained no procedures for liquidity assessment prior to placement, offered no direction on appropriate trading conduct during settlement periods, and included no measures for mitigating order disruption. BBL's settlement included a cease-and-desist provision against further supervision violations, establishing clear regulatory expectations for institutional commodity traders regarding market conduct and internal control infrastructure.
The specific violation originated from trading activity on December 29, 2017, involving Gasoil futures calendar spreads (Feb18/Dec18 contracts) on ICE Futures Europe. BBL instructed its executing broker, Goldman Sachs, to execute a series of large transactions—including the largest order ever submitted by BBL for that product—within the settlement window. Despite the executing broker raising liquidity concerns and questioning whether execution should begin before the settlement window, BBL persisted with its instructions. During the trading sequence, BBL's supervisor actively monitored the market disruption, including observable price spikes, yet issued explicit instructions to "keep buying." ICE Futures Europe subsequently determined the timing and quantity of orders to be disruptive, reckless, and disorderly, culminating in disciplinary action against Goldman Sachs in October 2019.
The CFTC's order detailed systemic deficiencies in BBL's policies and procedures: the firm lacked written protocols specifically addressing potentially disruptive trading, provided no guidance to staff on assessing the disruptive impact of orders, contained no procedures for liquidity assessment prior to placement, offered no direction on appropriate trading conduct during settlement periods, and included no measures for mitigating order disruption. BBL's settlement included a cease-and-desist provision against further supervision violations, establishing clear regulatory expectations for institutional commodity traders regarding market conduct and internal control infrastructure.
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