Goldman Sachs & Co.
CME RULE VIOLATIONS:
526. Block Trades (in part)
D. The price at which a block trade is executed must be fair and reasonable in light of (i) the size of the block trade, (ii) the prices and sizes of other transactions in the same contract at the relevant time, (iii) the prices and sizes of transactions in other relevant markets, including without limitation the underlying cash market or related futures markets, at the relevant time, and (iv) the circumstances of the markets or the parties to the block trade.
F. Unless otherwise agreed to by the principal counterparties to the block trade, the seller, or, in the case of a brokered transaction, the broker handling the block trade, 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) and Housing and Weather futures and options 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. 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.
Market Regulation Advisory Notice RA1201-3 Block Trades
3. Time and Prices of Block Trades (in part)
The trade price must be consistent with the minimum tick increment for the market in question. Additionally, each outright transaction and leg of any block eligible spread or combination trade must be executed at a single price.
Market Regulation Advisory Notice RA1203-3 Block Trades
5. Block Trade Price Reporting Requirements
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.
Pursuant to an offer of settlement in which Goldman, Sachs & Co. (“Goldman”) neither admitted nor denied the rule violations upon which the penalty is based, on October 28, 2014, a panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee found that it has jurisdiction over Goldman because it is a CME member and on three occasions between November 28, 2011, and June 26, 2013, Goldman, through its employees, executed block trades for customers in CME contracts that were not reported to the Exchange within the applicable time limit following execution. In so doing the Panel concluded that Goldman violated CME Rule 526.F.
The Panel also found that on two additional occasions during this same timeframe, Goldman, through its employees, executed spread block trades in Euro FX contracts. On both occasions, Goldman executed block eligible spread trades where each leg of the spread was not executed at the same price. In so doing, the Panel concluded that Goldman violated CME Rule 526.D.
The Panel further found that on June 26, 2013, Goldman, through its employees, consummated a block trade to sell March 2015 Eurodollar futures to a customer and, after realizing the trade was not reported to the Exchange within the requisite time limit, canceled the block trade and executed an identical trade with the same customer. In cancelling a consummated block trade, the Panel found that Goldman violated CME Rule 526.F.
The Panel also found that on one of the above occasions, Goldman failed to maintain accurate records with respect to block trade executions. Specifically, the order ticket was missing. Additionally, the Panel found that on at least one of the above occasions, Goldman reported to the Exchange an inaccurate execution time of the block trade. In failing to maintain accurate records and reporting inaccurate execution times, the Panel concluded that Goldman violated CME Rules 536.A. and 526.F.
In accordance with the settlement offer, the Panel ordered Goldman to pay a $70,000 fine.
October 30, 2014