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REUTERS

CME Group seeks dismissal of charges over Nymex information leaks

February 3, 2014 - 2:58pm


(Reuters) — CME Group Inc. has asked a U.S. judge to toss out charges brought by regulators alleging that the exchange operator is liable for two former employees accused of leaking details on clients' trades.

CME Group, in court documents filed on Friday, said the U.S. Commodity Futures Trading Commission was wrong to seek damages from the company in a civil lawsuit filed last year.

The commission in 2013 charged CME Group's New York Mercantile Exchange, or Nymex, and two former employees, William Byrnes and Christopher Curtin, with disclosing private information about trading in its energy markets to a commodities broker from 2008 to 2010.

CME said in its filing that the commission never alleged any misconduct by Nymex. Instead, the commission's complaint makes clear that the conduct was harmful to Nymex, according to CME.

"This court should dismiss the CFTC's novel attempt to hold Nymex liable for misconduct that was contrary to Nymex's policies and Nymex's interests," the company's filing said.

The commission's lawsuit against CME was striking because the exchange operator is an important supervisor in the U.S. self-regulatory system. It had quoted a Nymex official who said that maintaining the confidentiality of nonpublic information was the "lifeblood" of an exchange.

In its filing, CME sought to distance the two former exployees' alleged actions from Nymex, saying Messrs. Byrnes and Curtin "did not nourish the exchange's lifeblood. They poisoned it."

Lawyers for Messrs. Byrnes and Curtin in separate court documents have denied the commission's charges.

The commission declined to comment.

CME discovered in December 2010 that Mr. Byrnes had disclosed confidential Nymex customer information to broker Ron Eibschutz to help Mr. Eibschutz drum up business, according to CME's filing. The company said it immediately fired Mr. Byrnes and reported his misconduct to the commission.

The commission then initiated an investigation, during which the company learned that Mr. Curtin had taken part in similar leaks, according to court documents. CME also reported Mr. Curtin's misconduct to the commission, the filing said.

"The CFTC suggests that Nymex could have or should have done more to discover its employees' misconduct," CME said. "Those allegations are simply gratuitous."

The CFTC said last year that CME had reviewed Mr. Byrnes' phone calls and emails from just one day after receiving a complaint that a person called "Billy" — Mr. Byrnes' nickname — had disclosed secret information.

But CME did not question Mr. Byrnes, who continued disclosing information until a market party also complained, and then fired Mr. Byrnes, the commission's lawsuit said. The company had, in the meantime, promoted Mr. Byrnes to teach employees on confidentiality policies, according to the complaint.

CME, which bought Nymex in 2008, said last year that no customers or markets were hurt by the alleged leaks.

The broker, Ron Eibschutz, did not respond to a request for comment.

The case is U.S Commodity Futures Trading Commission v. Byrnes et al., U.S. District Court, Southern District of New York, No. 13-cv-01174.

 



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