• NOTICE OF DISCIPLINARY ACTION

      • #
      • CME-17-0631-BC
      • Effective Date
      • 04 December 2017
    • FILE NO.:

      CME 17-0631-BC

      MEMBER:

      Lean and Mean Options, LLC

      CME RULE VIOLATIONS:

      432. General Offenses

      It shall be an offense:

      T.        to engage in dishonorable or uncommercial conduct;

      W.       for a Member to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange;

      536.    Recordkeeping Requirements for Pit, Globex, and Negotiated Trades (in part) 

      A.        Each member shall provide his clearing member with any trading documents which are relied upon for transactional information necessary for submission to the clearing system containing those trades that have been executed thus far during that day. Trading documents include trading cards of members' personal and proprietary trades, trading cards of one member reflecting trades executed on behalf of another member and floor order tickets. Such trading documents must be submitted and timestamped no later than 15 minutes after the end of each half-hour interval. If a broker has only partially filled an order at the end of a half-hour period, he does not have to submit the document used to record the execution to the appropriate clearing member until the entire order has been filled, the unexecuted portion of the order is cancelled, or the market has closed for that contract, whichever occurs first.

      In addition, each member must maintain, and is accountable for, all other documents on which original trade information is recorded, whether or not such information is subsequently endorsed on an order ticket or entered into an approved electronic device.

      Special Executive Report S-7611: Updated Requirement for Proper Recordation, Endorsement, and Keypunching of CME Brokerage Reassignment (“BK”) Trades (in part)

      The BK process must be used by all IMM and IOM members who execute an options/futures spread trade via open outcry in an options pit where the futures leg of the spread is a product outside of the IMM or IOM member’s division. The purpose of the BK process is to ensure that any brokerage for the futures leg of the options/futures spread is properly credited to a member in the division in which the futures product has been allocated.

      The following must be denoted on the trading card or order ticket used by the IMM or IOM member executing the options/futures spread:

      4. The signature of the upper division member who will be credited with the brokerage applicable to the execution of the futures leg of the options/futures spread (the upper division member must be physically present on the trading floor at the time the order was executed, excluding the break rooms and restrooms).

      FINDINGS:

      Pursuant to an offer of settlement in which Lean and Mean Options, LLC (“Lean and Mean”) neither admitted nor denied the rule violations upon which the penalty is based, on November 30, 2017, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“BCC” or “Panel”) found that on December 16, 2016, brokers in the Lean and Mean brokerage association executing options-futures spreads in the Eurodollar options on futures pit reassigned 49,760 Eurodollar futures to a local/member of Lean and Mean who was not physically present on the trading floor when the orders were executed. Lean and Mean clerks and brokers continued to use order tickets signed by this local after they knew he was not on the floor that day. The Panel further found that the local/member of Lean and Mean also signed blank order tickets the previous day, December 15, 2016, which Lean and Mean clerks and brokers then used upon the execution of the futures leg of options – futures spreads. Moreover, the Panel found that this conduct was the result of Lean and Mean failing to diligently supervise, monitor, and educate its members, including its clerks, brokers and associates, as to how to properly discharge the brokerage reassignment (“BK”) process to ensure that any brokerage for the futures leg of the options-futures spread was accurately credited. The Panel thus concluded that Lean and Mean thereby violated CME Rules 536.A., 432.T., and 432.W.

      PENALTY:
      In accordance with the settlement offer, the Panel ordered Lean and Mean to pay a fine of $45,000.

      EFFECTIVE DATE:
      December 4, 2017