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.
RULE 432: GENERAL OFFENSES (in part)
It shall be an offense:
W. for a Member to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange;
Pursuant to an offer of settlement Weidong Ge (“Ge”) presented at a hearing on September 23, 2014, in which Ge neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the CBOT Business Conduct Committee (“BCC Panel”) found that Ge consented to the jurisdiction of the Exchange for purposes of resolving this matter and that on one occasion in December 2011, Ge directed traders to execute a series of wash trades in CBOT Soybean Oil (“Bean Oil”) futures between accounts held at Sheenson Investments, Ltd. (“Sheenson”) and Chaos Investment Company, Ltd. BVI (“BVI”) in order to avoid margin calls. The Panel found that Ge was the beneficial owner of all of the accounts in question at Sheenson and BVI and that in each of these instances, he was the sole decision maker for both the buy and sell side of the trades and directed traders to execute the wash trades. The Panel also found that Ge failed to diligently supervise these traders in that he was not familiar with Exchange rules and directed them to engage in wash trades, in violation of Exchange rules.
The Panel found that as a result of the foregoing, Ge violated Rules 534 and 432.W.
In accordance with the settlement offer, the BCC Panel ordered Ge to pay a fine to the Exchange in the amount of $15,000.
September 25, 2014
Please see companion case COMEX 12-8925-BC.
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