CBOT RULE VIOLATIONS:
Rule 534. Wash Trades Prohibited
No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means.
Pursuant to an offer of settlement in which William Shortal (“Shortal”) neither admitted nor denied the rule violations upon which the penalty is based, on February 11, 2014, a Panel of the Chicago Board of Trade Business Conduct Committee (“Panel”) found that Shortal voluntarily submitted himself to the jurisdiction of the BCC for purposes of settling this matter and that on July 13, 2012, Shortal, an employee of Central States Enterprises, LLC (“Central States”), executed three trades on Globex totaling 142 contracts in July 2012 Corn Futures in which Central States maintained ownership and control of the accounts on both sides of the transactions. Shortal placed orders with the knowledge and intent that these orders would match opposite orders placed by another employee of Central States acting at Shortal’s direction. The purpose of these transactions was to correct a previous error in allocation between accounts on the last trading day of the July 2012 Corn contract at a time when positions could no longer be transferred to offset between accounts.
The Panel concluded that Shortal thereby violated CBOT Rule 534.
In accordance with the settlement offer, the Panel ordered Shortal to pay a fine of $5,000. The Panel also suspended Shortal from all direct access to any trading floor or electronic trading or clearing platform owned or operated by CME Group Inc. for a period of 10 business days. The suspension will run from February 13, 2014 to February 26, 2014.
February 13, 2014
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