U.S. COMMODITY FUTURES TRADING COMMISSION 


Three Lafayette Centre 


1155 21st Street, NW, Washington, DC 20581 


www.cftc.gov 

Office of Proceedings 

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WINDJAMMER CAPITAL LLC, 

Complainant, 

v. 	 CFTC Docket No. 14-R1 


GLOBAL FUTURES EXCHANGE& 

TRADING COMPANY, INC., 

Respondent. 	

INITIAL DECISION 


Introduction 


Windjammer Capital ("Windjammer") alleges that Global Futures Exchange & 

Trading Company ("Global Futures") mishandled a series ofstop orders, and thus 

caused the wrongful liquidation of a 90-lot e-mini Nasdaq future long position. 

Windjammer claims that Global Futures improperly adjusted Windjammer's stop orders 

which prevented Windjammer from "scaling out" ofthe positions. According to 

Windjammer, had it not been precluded from scaling out, its losses would have been 

$31,385, which is $27,000 less than the $61,482 lost when the entire 90-lot position 

was liquidated. Windjammer seeks $29,642 in damages, based on the sum of above 

$27,000 differential and $2,642 in "liquidation fees" charged by the carrying broker. 

Global Futures denies that it mishandled Windjammer's stop orders or that the 

90-lot position was improperly liquidated. Global Futures asserts that Windjammer's 

owner, Dan Clay, in the face of a declining market, disregarded its instructions to reduce 
his exposure by liquidating positions, placing an appropriate stop, or wiring more funds, 

and as a result his account became insufficiently margined to carry the positions 

overnight, thus compelling the carrying broker to liquidate the seriously undermargined 90-lot position. 

The findings below are based on the parties' documentary evidence. As explained 

below after carefully reviewing the parties' submissions, I have concluded that 

Windjammer has failed to establish any violations proximately causing damages by 

Global Futures in connection with the disputed liquidation. 

Factual Findings 

The parties 

1. Complainant Windjammer Capital LLC ("Windjammer"), a Delaware limited 

liability company located in Bourne, Massachusetts, was a registered commodity trading 

advisor from May 2013 to August 2014. 

Dan Clay was the founder, sole owner and listed principal ofWindjammer. Clay 

directed the trading activity that is the subject ofthis dispute. When Clay opened the 

account in 2012, he represented that he had seven years' experience trading futures, 

options, securities and securities options. Clay also represented that the net cash and 

liquid value ofWindjammer was $so,ooo. 

2. In 2012, Clay opened Windjammer's account. The account was carried by 

Gain Capital Group LLC, d/b/a Open E Cry LLC ("OEC"), a registered futures 

commission merchant located in New Jersey. Windjammer's account was introduced by 

respondent Global Futures Exchange & Trading Company, Incorporated, a registered 

introducing broker located in Tarzana, California. 

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The account 

3. Windjammer's account was self-directed and non-discretionary. 

4. The account-opening documents provided to Clay on or about December 4, 

2012 included a "Global Futures Additional Risk Disclosure." Paragraphs 14 through 17 

ofthis disclosure provided: 

14. You understand that GFETC has the sole and absolute discretion 

and the right to limit positions in your account(s), to decline to accept any 

orders, and to require that your account(s) be transferred to another firm. 

You understand that ifyou do not promptly transfer your positions upon 

GFETCs demand, GFETC reserves the right to liquidate positions in your 

account(s) at its sole and absolute discretion. 

15. You agree to maintain such margin as GFETC may require in its 

sole and absolute discretion with respect to your account(s). Any accounts 

that fall into margin call will be charged a $25.00 per contract. An account 

that does not meet the margin requirement may be liquidated and a fee of 

$50.00 will be assessed to your account. Margin requirements and the fees 

may be increased without notice in GFETCs sole and absolute discretion 

and may differ from those established by the exchange on which the 

transaction is executed and the clearing firm at which your account is held. 

Margin requirements are subject to change without notice and will be 

enforced retroactively and prospectively. You shall make deposits of 

margin as GFETC requests within a reasonable time after such a request. 

It is agreed and understood that one hour may be deemed to be a 

reasonable time; provided, however, that GFETC, in its sole and absolute 

discretion, may require that deposits be made in a lesser period oftime. 

GFETCs failure to require satisfaction of a margin call within one hour, or 

any lesser period, on any occasion shall not be deemed to be a waiver ofits 

right to do so in the future. You shall provide GFETC with any information 

deemed reasonable and prudent for immediate verification ofwire 

transfers. 

16. In the event you fail to deposit sufficient funds to pay for any 

futures and/or commodities and/or to satisfy any demands for initial 

and/or variation margin, or whenever, in GFETCs sole and absolute 

discretion it considers it necessary, GFETC may, without prior demand or 

notice and not withstanding any rule of any exchange, liquidate and/or 

hedge the positions in your account(s). Such sale or purchase may be made 

without advertising or notice to you and in such a manner as GFETC may, 

in its sole and absolute discretion, determine, and no demands, tenders or 

notices which GFETC may make or give shall invalidate your aforesaid 

waiver. Ifliquidation is deemed necessary a liquidation fee of $so.oo per 

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contract will be assessed to your account and risk. You agree that GFETC 

has no duty and is not required to liquidate positions in your account(s) 

and that the provisions ofthis paragraph are solely for the protection of 

GFETC. 

17. You acknowledge that you shall be liable for all losses in your 

account(s) whether or not your account(s) is liquidated for any debts and 

deficiencies, including, but not limited to, interest, costs, expenses, 

maintenance fees, exchange rates, margin call fees, liquidation fees and 

attorney's fees, including all debts and deficiencies resulting from a 

liquidation ofyour account(s). 

Exhibit 8, Global Futures' answer. 

5. On four dates before the disputed liquidation, January 7 and 8, February 22, 

and September 30, 2013, Global Futures liquidated under-margined positions in 

Windjammer's account. On these dates, Global Futures reversed the liquidation fees 

assessed pursuant to paragraph 16 ofthe Global Futures Additional Risk Disclosure, and 

warned Clay about Global Futures' margin policy. After the fourth incident, Global 

Futures warned Clay that it would no longer reverse the liquidation fees in the event that 

he again permitted the account to become under-margined. See daily statements and 

September 30, 2013 e-mail, Exhibits 9and10, Global Futures' answer. 

6. Between December 2012 and October 2013, Clay made six deposits, four by 

wire and two by check, totaling $144,000. Between February 2013 and January 2014, 

Clay made five withdrawals totaling $78,488.1 See Exhibit 3, Global Futures' answer 

Disputed liquidation 

7. The disputed liquidation took place on November 7, 2013 and involved the 

December 2013 e-mini Nasdaq future ("NQZ3"). 

1 Amounts are rounded to the nearest dollar. 

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8. The CME Group's initial margin for the NQ was $3,245· OEC's day-trading 

margin for the NQ was $500. See Exhibit 5, Global Futures' answer. 

9. On November 6, 2013, Clay bought and sold 130 NQZ3's, and realized a loss of 

$16,960. At the close that day, the account value was $63,048. This provided enough 

margin for Clay to purchase 90 NQZ3's the next day. See Exhibit 6, Global Futures' 

answer. 

10. On November 7, 2013, the NQZ3 opened at 3374, ranged between a 3387 

high and 3314.25 low, and settled at 3319.4. From Bloomberg, LP market data services, 

via CFTC Division of Market Oversight. 

11. On November 7, 2013, Clay bought 90 NQZ3's at an average price of 3367. 

The CME's initial margin requirement for 90 NQZ's was $277,200, and OEC's daytrading margin requirement for 90 NQZ's.was $45,000. 

Clay also placed a stop at 3320. The total margin requirement at that price was 

$84,600. 

12. When the market dropped, Global Futures asked Clay, more than once, either 

to liquidate excess positions, to place an appropriate stop, or wire more funds. 

However, Clay did not choose any ofthese options. Rather, he placed a stop which 

would have created a $20,000 to $23,000 debit balance if executed. He was then 

notified that OEC was placing a stop, which Clay cancelled, twice. After the second 

cancellation, OEC and Global Futures decided to liquidate the 90-lot position, based on 

the following factors: the account had insufficient margin, the unrealized losses 

exceeded Windjammer's net capital, Clay's refusal either to wire more funds or place the 

correct stop. The liquidation resulted in a $58,385 loss. Windjammer's account also 

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was charged $3,097 in commissions and fees. The liquidation left the account with a 

positive $1,566 balance. See Exhibit 11, Global Futures' answer. 

13. The next day, November 8, 2013, Global Futures sent an e-mail to Clay 

explaining why the 90-lot position had been liquidated and why Global Futures would 

not be crediting any amount to Windjammer's account. See Exhibit 13, Global Futures' 

answer. 

Conclusions 

Initial and maintenance margins are instituted for the protection of futures 

commission merchants, and reflect the amount of risk a futures commission merchant is 

willing to accept for a customer's position. For this reason, it is well established that a 

futures commission merchant has considerable discretion to set and enforce its margin 

policies, absent evidence offraudulent or bad faith conduct. Baker v. Edward D. Jones 

& Company, Comm. Fut. L. Rep. 1!21,167 (CFfC 1981). Therefore, in order to establish 

wrongdoing by respondents, Windjammer must show by a preponderance ofthe 

evidence either that respondents misled Windjammer about Global Futures' margin 

policy or executed the November 7, 2013 liquidation in bad faith. 

Windjammer has not produced any evidence that Global Futures misled 

Windjammer about Global Futures' margin policy. In this connection, it appears that 

Global Futures repeatedly explained its margin policy when it liquidated undermargined trades on four occasions before the disputed liquidation. Windjammer also 

has failed to show that Global Futures acted in bad faith in connection with the disputed 

liquidation, where Global Futures offered Clay multiple options to correct the undermargined status ofthe account, all ofwhich Clay rejected. 

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ORDER 

Windjammer has failed to establish any violations proximately causing damages 

by Global Futures in connection with the disputed liquidation. Accordingly, the 

complaint in this matter is dismissed. 

December 22, 2015. 

/#-IL<)/A) </-{ P~cGuire, Judgment Officer 

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