APPLICABLE CME RULE:
402.C. BUSINESS CONDUCT COMMITTEE – EMERGENCY ACTIONS
1. The BCC is authorized to determine whether an emergency exists and whether emergency action is warranted. The following events and/or conditions may constitute emergencies:
e. Any circumstance in which it appears that a member or any other person or entity . . . is conducting business in such a manner that such person or entity cannot be permitted to continue in business without jeopardizing the safety of customer funds, Members, or the Exchange;
BASIS OF ACTION:
On October 5, 2010, a Panel of the CME Business Conduct Committee took an emergency action against non-member Carmine Garofalo. This action is based on a good faith determination that on numerous occasions on March 4 and 5, 2010, Garofalo appeared to enter orders into the CME Globex electronic trading platform for CME Euro/U.S. Dollar European Style Premium Options and E-mini S&P 500 Options contracts for Garofalo’s personal account, and for a third-party account which he did not own, control or have authority to trade. The orders for Garofalo’s personal account appeared to be entered on the opposite side of the market as the orders Garofalo entered for the third-party account, with identical limit prices and volumes. The orders matched as trades, giving Garofalo and the third-party account equal and opposite positions in the market. Garofalo appeared to subsequently enter orders for himself and the third-party account at a different price to offset the initiating positions, which would have enabled Garofalo’s personal account to realize a profit and the third-party account to realize a corresponding loss. This pattern of round-turn transactions appeared to result in Garofalo misappropriating money from the third-party account.
In the good faith exercise of its sole discretion, the Panel has good cause to believe that Garofalo is, has been or will be conducting business in a manner that cannot be permitted to continue without jeopardizing the safety of customer funds, Members or the Exchange.
Pursuant to Rule 402.C., Garofalo is hereby barred from directly or indirectly accessing all CME Group markets, including the Globex platform, all trading floors owned or controlled by CME Group. This includes CME, CBOT, NYMEX and COMEX, and all clearing platforms owned or controlled by CME Group.
This action prohibits Garofalo from trading, placing orders (on his own or someone else’s behalf), or soliciting business on any exchange owned or controlled by CME Group. Garofalo is also precluded from affiliating or doing business with any member or member firm of CME, CBOT, NYMEX or COMEX.
This action is effective for a period of 6 months, beginning immediately and continuing through and including April 7, 2011.
October 6, 2010
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