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Financial advisory
RES5Financial Advisory Services✓Mr Sim, a representative at Arc Futures, receives an order from a fund to buy 400 lots of a crude oil futures contract. Before entering it he buys 20 lots for his own account. He then telephones a dealer at another firm and the two agree to trade 200 lots at 78.40 before either side reaches the market. For the remaining 200 lots he tells the fund the order was filled at 78.45, when in truth nothing was sent to the exchange and Arc booked the other side internally at 78.35. How are the three acts classified, in order?
Trading ahead of a customer order in the same class breaches the priority of customers' orders in SFR(LCB) reg 44. Agreeing a price with another dealer before the orders reach the market is pre-arranged trading. Reporting a fill that was never executed on the market, while taking the other side, is bucketing under SFA s.201A, and it also breaches reg 47(1) on withholding orders and reg 47C on trading against the customer.
Bucketing is not merely taking the other side; it is claiming an execution that never happened on the market.
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