RBC Capital Markets Fined $90,000 for Anticipatory Hedging

Cboe Exchange has taken action against RBC Capital Markets for an alleged rules violation of anticipatory hedging. Consequently, RBC was slapped with a censure order and a monetary penalty of $90,000.

The action came as a result of an investigation conducted by FINRA’s Department of Market Regulation concerning an anticipatory hedging activity.

Anticipatory hedging is a strategy with which a trader takes a futures position in advance of an upcoming buy or sell transaction. This type of hedging has several restrictions imposed by the regulatory rules, primarily to protect customer interest.

RBC has allegedly violated the Cboe exchange rules as one of its traders engaged in an anticipatory hedging transaction on 17 September 2019, while executing the order of a customer.

“The acts, practices and conduct… constitute a violation of Exchange Rules 4.1 and 6.9 by RBC in that the Firm, by and through its Associated Person, entered an order in the same options class prior to the public disclosure of the original customer order’s terms and conditions,” Cboe’s order stated.

Clean Record

While deciding on the actions, the derivatives exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term pointed out that RBC does not have any prior relevant disciplinary history specifically related to anticipatory hedging.

RBC has already issued a Letter of Consent for the purpose of proposing a settlement Settlement Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Read this Term of the alleged rule violations. It has agreed to the censure order and the monetary fine.

“The Firm neither admits nor denies that violations of Exchange Rules have been committed, and the stipulation of facts and findings… do not constitute such an admission,” the letter added.

Other agencies in the United States are actively cracking down on violations in the financial markets. The SEC last month slammed TradeZero America with a penalty of $100,000 for false statements around the limitation around meme stocks. FINRA is another regulatory body that is constantly finding market violations and taking action.