Morgan Stanley & Co. LLC
CME RULE VIOLATIONS:
Rule 526. Block Trades (in part)
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.
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 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 Morgan Stanley & Co. LLC (“Morgan Stanley”) 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 Morgan Stanley because it is a CME member between June 22, 2011, and September 2, 2013, Morgan Stanley, through its employees, executed multiple block trades for customers in various CME contracts that were not reported to the Exchange within the applicable time limit following execution. In many instances the block trades’ reported execution times were not accurate. In so doing, the Panel concluded that Morgan Stanley violated CME Rule 526.F.
The Panel further found that, on at least two of the above occasions, Morgan Stanley failed to maintain accurate written or electronic records of the block trade transactions. Specifically, order tickets did not accurately reflect the times of execution. In so doing, the Panel concluded that Morgan Stanley violated CME Rule 536.A.
In accordance with the settlement offer, the Panel ordered Morgan Stanley & Co. LLC to pay a fine of $75,000.
October 30, 2014
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