• NOTICE OF DISCIPLINARY ACTION

      • #
      • CME-15-0294-BC
      • Effective Date
      • 01 September 2017
    • FILE NO.:

      CME-15-0294-BC

      MEMBER:

      Morgan Stanley & Co., LLC

      CME RULE VIOLATION:

      Rule 561.A. Large Trader Reporting (in part)

      Clearing members, omnibus accounts and foreign brokers shall electronically submit to the Exchange a daily large trader position report of all positions required to be reported as set forth in the Position Limit, Position Accountability and Reportable Level Table, in the Interpretations Section at the end of Chapter 5. Positions at or above the reportable level in a particular expiration month of a futures contract, or in all puts or in all calls of a particular option contract expiration month, are required to be reported. For an account with reportable positions in a particular contract, all positions, regardless of size, in any contract month and in any contract that aggregates with that contract must be reported.

      FINDINGS:

      Pursuant to an offer of settlement in which Morgan Stanley & Co., LLC (“Morgan Stanley”) neither admitted nor denied the rule violation upon which the penalty is based, on August 30, 2017, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“Panel”) found that between 2009 and September 2015, Morgan Stanley failed to submit to the Exchange a daily large trader position report of all positions in its accounts that were at or above the reportable level in various equity and FX products because Morgan Stanley’s proprietary large trader system was not accurately mapping the options contracts for some futures to the related futures contracts. As a result, when a futures position in an account became reportable, Morgan Stanley failed to include the positions for the related options (that were not independently reportable because they were below the reporting threshold) in the large trader position file. Similarly, when an options on futures position became reportable in an account, the positions for the related futures contract (that were not independently reportable because they were below the reporting threshold) were not reported in the large trader position file. The Panel concluded that Morgan Stanley thereby violated CME Rule 561.A.

      PENALTY:

      In accordance with the settlement offer, and after taking into consideration that Morgan Stanley self-reported the activity to CME Group Inc., the Panel ordered Morgan Stanley to pay a fine of $100,000 in connection with this case and companion case NYMEX 15-0294-BC, $75,000 of which is allocated to CME.

      EFFECTIVE DATE:

      September 1, 2017