Mark Steven Arenson
CBOT RULE VIOLATIONS:
Rule 521. Requirements for Open Outcry Trades (in part)
In open outcry trading, bidding and offering practices must at all times be conducive to the competitive execution of transactions. All open outcry transactions, including spread and combination transactions, shall be made openly and competitively in the pit designated for the trading of the particular transaction. No bid or offer shall be specified for acceptance by a particular trader. Transactions may take place only at the best price available in the open outcry market at the time the trade occurs.
Rule 539, Prearranged, Pre-Negotiated and Noncompetitive Trades Prohibited (in part)
A. General Prohibition
No person shall prearrange or pre-negotiate any purchase or sale or noncompetitively execute any transaction.
Rule 527.D. Errors and Mishandling of Orders (in part)
1. Unfilled or Underfilled Orders
If a broker fails to execute an order or underbuys or undersells for an order, the broker shall do one of the following:
a. Execute the order or the remainder of the order in the market and adjust the customer by check if the customer is filled at a price less favorable than that to which he was entitled due to the broker’s error or mishandling of the order. If the order is filled at a more favorable price, the customer is entitled to the better price.
b. Execute the order or the remainder of the order in the market. If the order, or the remainder of the order, is filled at a worse price than that to which the customer was entitled but for the error or mishandling, the broker may allocate the fill to his error account, pursuance to section C.1. above, provide the customer a fill at the price to which the customer was entitled, and place the opposite side of the customer fill into his error account. If the order is filled at a more favorable price, the customer is entitled to the better price.
Pursuant to an offer of settlement in which Mark Arenson (“Arenson”) neither admitted nor denied the rule violations upon which the penalty is based, on December 17, 2014, a Panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee (“Panel”) found that it had jurisdiction over Arenson pursuant to rules 400 and 402 as Arenson is a CBOT Member. The Panel further found that on three occasions between September 2012 and February 2013, while in the 10-Year Treasury Note Options pit, Arenson executed a portion of customer orders, for a total of 2,600 option strategies, opposite other brokers, without bidding or offering his orders in a manner consistent with open and competitive trades. Additionally, the Panel found that on one occasion on May 13, 2013, in resolving an underfilled order, Arenson failed to first execute the unfilled quantity in the market at a competitive price. The Panel concluded that as a result of the foregoing, Arenson violated CBOT Rules 521, 539.A., and 527.D.1.
In accordance with the settlement offer, the Panel ordered Arenson to pay a fine in the amount of $35,000, and to serve a suspension of 10 business days from membership privileges on any CME Group Inc. exchange, access to all CME Group Inc. trading floors and direct access to all electronic trading and clearing platforms owned or operated by CME Group Inc., including Globex. The suspension will run from December 19, 2014, and continue for a period of 10 business days from the date that the ordered fine is paid in full.
December 19, 2014
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