CFTC Orders Pennsylvania Resident Robert M. McMahon to Pay $171,800 Civil Monetary Penalty and Imposes Permanent Trading and Registration Bans for Engaging in Deceptive Trade Allocation Scheme

 

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Robert M. McMahon of Mt. Pocono, Pennsylvania, for engaging in a deceptive trading scheme involving Henry Hub Natural Gas Futures (NG) contracts, traded on the New York Mercantile Exchange (NYMEX). The CFTC Order requires McMahon to pay a $171,800 civil monetary penalty and imposes permanent trading and registration bans on him. The Order also requires McMahon to cease and desist from further violations of the Commodity Exchange Act, as charged.

The Order finds that, in or about July 2010, McMahon engaged in a deceptive trading scheme that allocated to himself futures contracts priced at better than market prices, while allocating to a customer futures contracts priced at worse than market prices. To perpetuate the scheme, the customer’s NG orders were filled with noncompetitively executed block trades, with McMahon taking the other side of the customer’s block trades. The Order further finds that these block trades were executed at prices unfavorable to the customer but favorable to McMahon. Almost simultaneously, McMahon executed for himself futures contracts on NYMEX at market prices that entirely offset his noncompetitively executed block trades for a large profit. Further, according to the Order, with this structure — matching McMahon’s noncompetitively priced block trades almost immediately with offsetting, competitively priced market trades — the scheme virtually guaranteed that McMahon profited, at the customer’s expense, on each block trade. On July 28, 2010, McMahon improperly profited $171,800 from two such transactions, the Order finds.

The CFTC appreciates the assistance of the CME Group.

CFTC Division of Enforcement staff members responsible for this case are Gates S. Hurand, K. Brent Tomer, Lenel Hickson Jr., and Manal M. Sultan.

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