June 25, 2010

The Financial Industry Regulatory authority hit Phoenix Derivatives Group with a $3 million fine over improper communications about customers’ proposed brokerage rate reductions in the wholesale credit default swap market.

The firm was also sanctioned for supervision failures, document production and record retention violations. The regulator added that three of Phoenix’s CDS desk co-heads tried to improperly influence other interdealer brokerage firms and their employees regarding brokerage fees and rate reductions.

“FINRA’s requirements … are designed to prevent the types of inter-firm communications that occurred in this case, which threaten the proper function of market forces,” Tom Gira, an executive vice president at FINRA’s department of market regulation said in a statement.

Phoenix settled the matter without admitting or denying the allegations, FINRA added in the release.

FINRA also suspended former Phoenix managing Partner Jon Lines for three months. Wesley Wang, a managing partner got a two-month suspension and his counterpart Marcos Brodsky was suspended for a month.

The regulator also hit five brokers at other interdealer firms in the CDS market with a $1.3 million fine and levied suspensions against them as it conducts a review.

ABOUT THE AUTHOR
As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced ...