A Chicago Board Options Exchange director who declared bankruptcy after suffering big trading losses was cleared last month in a related exchange disciplinary investigation. The kicker: No one on the CBOE staff bothered to notify him until Friday afternoon.
Thomas P. Haugh has been a CBOE director since 1992, although he repaid his clearing firm for only part of a $3.4 million deficit racked up during the 1987 stock market crash, court records show.
The CBOE revealed in Bankruptcy Court filings that it launched a formal inquiry into Haugh’s conduct last year.
In an interview Friday, Haugh said he did nothing wrong. The CBOE was investigating him because it is zealous in policing its 21 directors, he said, predicting the exchange would clear him.
Turns out, the CBOE’s market-regulation department recommended in mid-May that no action be taken against him but never told Haugh of its decision, an exchange spokeswoman said. No other CBOE directors are under investigation, she added.
Haugh had voluntarily sought personal bankruptcy protection in January 1997 in the midst of separate civil litigation brought against him by two CBOE trading firm executives.
Anthony Saliba and Stephen Kaufman had filed suit the year before, saying Haugh failed to repay them for crash-related losses.
Saliba and Kaufman, who were partners in the CBOE clearing firm FFG at the time of the crash, agreed in 1988 to settle Haugh’s debt for $2.6 million, according to the lawsuit they filed against him. In 1994, after Haugh said he couldn’t afford the settlement, he agreed to pay $700,000 over 4 1/2 years, but failed to make required payments, the complaint said.
In his Chapter 7 petition, Haugh listed his debt to Saliba at $312,500, and to Kaufman at $187,500. Among his other creditors were CBOE director Mark Duffy and former director Jon Najarian, each owed $75,000.
The exchange has no rule against board members serving during personal bankruptcy proceedings, its spokeswoman said.
As of late May, Haugh had no assets to satisfy creditors, according to court-appointed trustee Alex D. Moglia. “We were working with some of his creditors to try to determine whether he had assets beyond those listed,” Moglia said in an interview. “We could not find anything.”
Exchanges rate: To hear the Commodity Futures Trading Commission tell it, the proposed Cantor Financial Futures Exchange and FutureCom internet exchange are just the beginning.
“We are going in the next year or so to be inundated with applications of this kind,” said I. Michael Greenberger, director of the CFTC’s trading and markets division. As well, electronic exchanges based overseas are expected to expand their trading-terminal networks in the U.S.
More Top Picks Winter Coat
Speaking at last week’s Managed Funds Association conference in Chicago, Greenberger said he wants to streamline the approval process by establishing a regulatory model for computerized trading systems.
Meantime, backers of the Cantor exchange say they expect CFTC approval as soon as mid-July. “We are really gearing up . . . for a midsummer launch,” said Debra Walton-Collings, a managing director at Cantor Fitzgerald. “In systems, sales and marketing, it’s all full-steam ahead.”
Catch-up: The Chicago Mercantile Exchange could be in for a mammoth technology bill.
The exchange may face more than $30 million in near-term expenditures to get up to speed, partly because it hasn’t spent enough to upgrade its hardware over the years, exchange sources said.
The Merc’s outdated local area network system could cost as much as $24 million to redevelop, while its Tandem mainframe system could require another $7 million, the sources said.
Part of the demand for systems capacity is driven by growth in the “E-mini,”–a smaller version of the S&P 500 futures contract–and other electronic products, said William Jenks, a Merc executive vice president. “We want to provide the very latest and best technology.”