CME RULE VIOLATIONS:
533. SIMULTANEOUS BUY AND SELL ORDERS FOR
DIFFERENT BENEFICIAL OWNERS (In relevant part)
On the Globex platform, opposite orders for different beneficial owners that are simultaneously placed by a party with discretion over both accounts may be entered into the Globex platform provided that one order is exposed for a minimum of 5 seconds in the case of futures orders or a minimum of 15 seconds in the case of options orders. An order allowing for price and/or time discretion, if not entered immediately upon receipt, may be knowingly entered opposite another order entered by the same firm only if this other order has been entered immediately upon receipt and has been exposed on the Globex platform for a minimum of 5 seconds for futures orders or a minimum of 15 seconds for options orders….
534. WASH TRADES PROHIBITED (IN EFFECT UNTIL NOVEMBER 3, 2009)
No person shall place for the same beneficial owner buy and sell orders for the same product and expiration month, and, for a put or call option, the same strike price, at or about the same time with the intent to avoid a bona fide market position exposed to market risk (transactions commonly known or referred to as wash sales). Buy and sell orders placed for the same beneficial owner in the same product and expiration month, and, for a put or call option, the same strike price, must be entered in good faith for the purpose of executing bona fide transactions that result in a change of ownership. Additionally, no person shall accept, execute or accommodate the execution of orders which are prohibited by this rule with knowledge of their character.
Pursuant to an offer of settlement in which Robert Doherty neither admitted nor denied the rule violations upon which the penalty is based, on May 10, 2011, a panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee found that on one or more occasions between February 1, 2008 and February 10, 2009, Doherty and another non-member crossed buy and sell E-mini Standard and Poor 500 Stock Price Index options orders on the CME Globex® electronic trading platform in a manner that did not allow for exposure of the first order for the prescribed time period before the entry of the second order. Additionally, Doherty and the other non-member placed buy and sell orders opposite each other in which the same account was on both the buy and sell sides of the transactions resulting in wash trades. The panel found that in doing so, Doherty violated CME Rules 533 and 534.
In accordance with the settlement offer and in consideration of Robert Doherty’s enhanced compliance training and procedures since implemented, the panel fined Robert Doherty $35,000.
May 12, 2011
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