CBOT RULE VIOLATIONS:
Rule 432. General Offenses
It shall be an offense:
G. To prearrange the execution of transactions in Exchange products for the purpose of transferring equity between accounts.
Following an evidentiary hearing on the merits on August 11, 2016, a Panel of the CBOT Business Conduct Committee (“Panel”) issued a written decision finding that Yong Zhang (“Yong”), a non-member, prearranged a series of 96 round turn transactions in Soybean futures from October 8, 2012, and November 8, 2012, for the purpose of moving $30,787.50 from an account owned by Yong’s employer to another non-member’s account. Additionally, the Panel found that the trading activity took advantage of large bid/ask spreads allowing the two accounts to repeatedly place initial trades followed quickly by liquidating trades in the opposite direction. The buy and sell orders that formed the round turns were entered within seconds of each other and the median time between the initiating and liquidating trades was less than one minute. Ninety-three of these transactions resulted in a profit to the non-member’s account. Based on these facts, the Panel determined that the trading activity was prearranged for the purpose of transferring equity between the two accounts.
The Panel also found that a strong presumption exists that Yong, as the registered user of the account, was responsible for trades made under his Tag50 User ID. Further, the Panel found that Yong’s written answer to the charges raised serious questions about his credibility. Based on these facts the Panel determined that Yong was responsible for the transactions and found him guilty of violating CBOT Rule 432.G.
Based on the record and the Panel’s findings and conclusions, the Panel ordered that Yong be barred permanently from (1) applying for membership at any CME Group exchange; (2) direct or indirect access and use of any trading floor, electronic trading platform or clearing platform owned or operated by any CME Group exchange; and (3) affiliation with, employment by, or association with a Member (as this term is defined in Rule 400) or affiliate of a Member of any CME Group exchange. The Panel further ordered Yong to pay a fine of $100,000, and ordered him to pay $30,787.50 in restitution.
October 10, 2016
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