Washington, D.C. — The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against Advantage Futures LLC, a registered futures commission merchant based in Chicago, Illinois, for failing to diligently supervise the handling of commodity interest accounts, which resulted in incomplete and inadequate oversight of its surveillance of customers’ trading activity for disruptive trading over a four-year period, in violation of CFTC regulations. 

The order requires Advantage to pay a $395,000 civil monetary penalty and to cease and desist from any further violations of its supervisory requirements, as charged.  

Case Background

According to the order, Advantage’s policies and procedures specified that customer trades it cleared would be surveilled for disorderly trading using complex trade analysis software. However, during the relevant period, Advantage did not fully comply with its policies and procedures and failed to process and surveil three separate sets of customer order and execution data over three distinct periods.

According to the order, Advantage’s surveillance vendor failed to process data for one exchange’s futures contracts between July 2018 and December 2020. This lapse occurred because Advantage’s vendor dropped one of the data feeds after testing was complete and surveillance went live. Advantage did not ensure its vendor was receiving and processing all customer trade data, which resulted in certain of its customers’ products trading not being surveilled for nearly two and a half years.

The order also finds Advantage’s surveillance vendor did not receive data from another exchange between June 2019 and June 2022. When Advantage switched to a new clearing broker in June 2019, Advantage, through its surveillance vendor, failed to switch the data feed connections from its prior clearing broker to its new clearing broker.

In addition, the order finds Advantage failed to send its surveillance vendor the order and trade data for a some of its customers’ total trading on two other exchanges between July 2018 and June 2022, which prevented surveillance on that trading activity.    

In total, the order finds Advantage’s failures caused over 12.8 million cleared contracts to not be processed or surveilled between July 2018 and June 2022.  This represents nearly 1.5% of Advantage’s customers’ trading volume during that four-year period. Advantage represents it has taken steps to ensure that, going forward, it receives and surveils trade and order data for exchanges it clears. Those steps include retaining a new surveillance vendor, reprocessing and reviewing data that was not reviewed in real time, hiring additional staff focused on trade surveillance, and implementing controls to ensure connectivity to exchange data feeds. 

The CFTC appreciates the assistance of the Quebec Autorité des marchés financiers.

The Division of Enforcement staff members responsible for this case are Doug Snodgrass, Joy McCormack, Allison Passman, Scott Williamson, and Robert Howell.

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Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the CFTC Whistleblower Office. Whistleblowers may be eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the Commodity Exchange Act.