Credit-default swaps broker Phoenix
Partners Group and brokers who worked at four other firms including Tullett Liberty Inc. and Creditex Group Inc. will pay $4.3 million to settle claims that they attempted to fix fees.
The brokers, who match trades between banks in the $25 trillion market, communicated with competitors about efforts to counter proposed reductions in the fees they earn from the derivatives transactions, according to complaints released yesterday by the
Financial Industry Regulatory Authority.
The settlements are part of a broader probe by Washington- based Finra of suspected misconduct in 2005 and 2006 among the so-called interdealer brokers, Finra spokesman Herb Perone said in an interview.
ICAP Plc, the world’s biggest broker of trades between banks, agreed to pay $2.8 million last year to settle claims a former manager improperly tried to influence fees. GFI Group Inc. said in a regulatory filing last year that one of its units was cooperating with an inquiry and that it may face similar claims.
Phoenix, two of its brokers and a former employee will pay $3 million in fines to settle claims the brokers “engaged in improper communications with other interdealer brokers about CDS dealers’ brokerage rate proposals,” Finra said in one of its complaints. The brokers, Marcos Brodsky, Jon Lines and Wesley Wang, also will serve suspensions from the industry of one to three months. Phoenix is based in New York.
Individual Fines
Thomas J. Lewis and Matthew A. Somers, former co-managers of the credit swaps desk at Chapdelaine Corporate Securities & Co., who now co-head the swaps desk at Tullett Liberty, a division of London-based Tullett Prebon Plc, will each pay a $350,000 fine. Lewis will serve a six-month suspension and Somers will be suspended for three months.
Creditex broker Eric Ridder will pay $250,000 in addition to a two-month suspension. Creditex was bought in 2008 by Intercontinental Exchange Inc.
Michael Jessop, former co-manager of Tullett Liberty’s credit swaps desk who now works for BGC Financial LP, will pay $250,000 and serve a two-month suspension.
John P. Tompkins, a former broker at CreditTrade Inc. in New York, will pay $100,000 and serve a four-month suspension, Finra said.
Phoenix Chief Executive Officer Nicholas Stephan said in an e-mailed statement that the investigation stems from “a period when Phoenix was an upstart firm with about 25 employees and virtually no market share.”
‘Preferred to Fight’
“We would have preferred to fight this matter to its conclusion,” he said. “We determined the commercially expedient course of action was to settle this matter and focus on our growing business.”
Kelly Loeffler, a spokeswoman for Atlanta-based Intercontinental, and Jessop declined to comment. Tullett Liberty and the other brokers paying fines couldn’t be reached for comment.
Finra said the discussions among the brokers, which took place from July 2005 to December 2006, came in response to an attempt by banks to reduce the fees they pay to brokers in the inter-dealer market. In some cases, the discussions included “mutually parallel counter-proposals” to the banks’ requests.
