• NOTICE OF DISCIPLINARY ACTION

      • #
      • CBOT 10-7563-BC
      • Effective Date
      • 22 January 2015
    • MEMBER FIRM:

      J.P. Morgan Securities LLC

      CBOT RULE VIOLATIONS:

      (Legacy) Rule 526. Block Trades

      A. A block trade must be for a quantity that is at or in excess of the applicable minimum threshold. Orders may not be aggregated in order to achieve the minimum transaction size, except by those entities described in Sections I. and J.

      F. The seller must ensure that each block trade is reported to the Exchange within five minutes of the time of execution; except that block trades in interest rate futures and options executed outside of Regular Trading Hours (7:00 a.m. – 4:00 p.m. Central Time, Monday – Friday on regular business days) must be reported within fifteen minutes of the time of execution.

      The report must include the contract, contract month, price, quantity of the transaction, the respective clearing members, the time of execution, and, for options, strike price, put or call and expiration month. The Exchange shall promptly publish such information separately from the reports of transactions in the regular market.

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

      A.1. Customer Orders
      At the time of execution, every order received from a customer must be in the form of a written or electronic record and include an electronic timestamp reflecting the date and time such order was received on the floor of the Exchange and, except as provided in Section C, must identify the specific account(s) for which the order was placed. Such record shall also include an electronic timestamp reflecting the date and time such order was modified, returned, confirmed or cancelled.

      E. Negotiated Trades
      All orders executed in accordance with Rules 526 and 538, unless otherwise exempted by rule, are subject to the recordation requirements pursuant to Section A.1.

      Market Regulation Advisory Notice RA1203-3 Block Trades

      5. Block Trade Price Reporting Requirements (in part)

      b) Reporting Obligation (in part)
      The failure to submit timely, accurate and complete block trade reports may subject the party responsible for the reporting obligation to disciplinary action.

      FINDINGS:

      Pursuant to an offer of settlement in which J.P. Morgan Securities LLC (“JPMS”) neither admitted nor denied the rule violations upon which the penalty is based, on January 20, 2015, a Panel of the CBOT Business Conduct Committee found that it had jurisdiction over JPMS pursuant to CBOT Rules 400 and 402 as JPMS is a CBOT member. The Panel also found that between April 20, 2010, and September 9, 2013, JPMS, in connection with block trades in various CBOT contracts: (i) reported inaccurate execution times for certain block trades; (ii) failed to report certain block trades within the allowable time following execution; (iii) did not maintain order tickets or other acceptable records of executed block trades on more than one occasion; and (iv) in one instance, reported an inter-commodity spread trade to the Exchange as a block trade when the transaction did not meet the minimum quantity threshold for inter-commodity spread block trades. The Panel concluded that JPMS thereby violated CBOT Rules 526 and 536.

      PENALTY:

      In accordance with the settlement offer, the Panel ordered JPMS to pay a $75,000 fine.

      EFFECTIVE DATE:

      January 22, 2015