• NOTICE OF DISCIPLINARY ACTION

      • #
      • NYMEX 16-0503-BC
      • Effective Date
      • 01 February 2018
    • MEMBER:

      Peter C. Miller

      NYMEX RULE VIOLATION:

      EXCHANGE RULE 526. BLOCK TRADES

      The Exchange shall designate the products in which block trades shall be permitted and determine the minimum quantity thresholds for such transactions. The following shall govern block trades:

      NYMEX/COMEX MARKET REGULATION ADVISORY NOTICE RA 1519-5 (in relevant part)

      10. Use of Non-Public Information Regarding Block Trades

      Pre-hedging or anticipatory hedging of any portion of a block trade in the same product or a closely-related product based upon a solicitation to participate in a block trade is not permitted. A closely-related product is a product that is highly correlated to, serves as a substitute for, or is the functional economic equivalent of the product being traded as a block.

      Counterparties to a block trade are permitted to initiate trades, to hedge or offset the risk associated with the block trade following the consummation of the block trade, including during the period preceding the public report of the block trade by the Exchange.

      Except as provided above, parties privy to non-public information attendant to a block trade are prohibited from trading in the same product or a closely-related product for the purpose of taking advantage of such information prior to the public report of the block trade by the Exchange. This prohibition is not intended to preclude such parties from continuing to transact in the marketplace by the Exchange or the information can otherwise be demonstrated to have become stale or obsolete.

      FINDINGS:

      Pursuant to an offer of settlement that Peter C. Miller (“Miller”) presented at a hearing on January 30, 2018, in which Miller neither admitted nor denied the findings or rule violation upon which the penalty is based, a Panel of the NYMEX Business Conduct Committee (“BCC”) found that on numerous dates between January 1, 2016 and March 31, 2016, Miller pre-hedged block trades involving Henry Hub Last-Day Financial Futures (“Financial Futures”) by trading Henry Hub Natural Gas Futures (“Natural Gas”) on Globex prior to consummating the block trade with the counterparty. Specifically, after receiving the solicitation of a Financial Futures block trade but prior to consummating the block trade, Miller entered into a separate hedge transaction in Natural Gas futures on the opposite side of the market Miller took upon the subsequent consummation of the block trade. As a result of pre-hedging these block trades, Miller realized a profit in the amount of $61,519.

      The Panel found that, as a result, Miller violated NYMEX Rule 526 (Block Trades).

      PENALTY:

      In accordance with the settlement offer, the Panel ordered Miller to pay a fine to the Exchange in the amount of $35,000, to disgorge profits in the amount of $61,519, and suspended Miller from all membership privileges and direct or indirect access to any CME Group trading floor or CME Group electronic trading or clearing platform, including Globex, for 10 business days, beginning on the effective date below. The suspension will run from February 1, 2018 through February 14, 2018.