• NOTICE OF DISCIPLINARY ACTION

      • #
      • 12-CH-1201
      • Effective Date
      • 01 May 2012
    • 12-CH-1201

      EXCHANGE DISCIPLINARY ACTION

      CLEARING MEMBER: Dorman Trading LLC

      CME RULE VIOLATIONS:  

      930.E.  Calls for Performance Bond

      1. Clearing members must issue calls for performance bond that would bring an account up to the initial performance bond requirement: a) when performance bond equity in an account initially falls below the maintenance performance bond requirement; and b). subsequently, when performance bond equity plus existing performance bond calls in an account is less than the maintenance performance bond requirement.
      Such calls must be made within one business day after the occurrence of the event giving rise to the call. Clearing members may call for additional performance bond at their discretion. Notwithstanding the foregoing, a clearing member is not required to call for or collect performance bond for day trades.

      2. Clearing members shall only reduce a call for performance bond through the receipt of performance bond deposits permitted under subsection C. of this rule. Clearing members may cancel a call for performance bond through: a) the receipt of performance bond deposits permitted under subsection C. of this rule only if such deposits equal or exceed the amount of the total performance bond call; or b) inter-day favorable market movements and/or the liquidation of positions only if performance bond equity in the account is equal to or greater than the initial performance bond requirement. Clearing members shall reduce an account holder's oldest outstanding performance bond call first.

      3.    Clearing members must maintain written records of all performance bond calls issued and satisfied in whole or in part.

      971.     Segregation, Secured and Sequestered Requirements

      A.    All clearing members must comply with the requirements set forth in CFTC Regulations 1.20 through 1.30, 1.32, and 30.7, and CME Rules 8F100 through 8F136. This includes, but is not limited to, the following:

      1.    Maintaining sufficient funds in segregation or set aside in separate or sequestered accounts;

      2.    Computing, recording and reporting completely and accurately the balances in the:

      a.    Statement of Segregation Requirements and Funds in Segregation;

      b.    Statement of Secured Amounts and Funds Held in Separate Accounts; and

      c.    Statement of Sequestration Requirements and Funds Held in Sequestered Accounts.

      3.    Obtaining satisfactory segregation, separate and sequestered account acknowledgment letters and identifying segregated, separate and sequestered accounts as such; and

      4.    Preparing complete and materially accurate daily segregation, secured and sequestered amount computations in a timely manner.

      B.    Exchange staff may prescribe additional segregation, secured and sequestered amount requirements.

      C.   All clearing members must provide written notice to the Audit Department of a failure to maintain sufficient funds in segregation or set aside in separate or sequestered accounts. The Audit Department must receive immediate written notification when a clearing member knows or should know of such failure.

      FINDINGS: Pursuant to an offer of settlement in which Dorman Trading LLC neither admitted nor denied the violations, the Clearing House Risk Committee found that Dorman Trading LLC violated the above rules.

      PENALTY: In accordance with the settlement offer, the Committee imposed a $25,000 fine.

      EFFECTIVE DATE: May 1, 2012