J.P. Morgan Securities LLC
CME RULE VIOLATIONS:
(Legacy) Rule 526. Block Trades
F. The seller 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) 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. Customer Orders
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.
E. Negotiated Trades
All orders executed in accordance with Rules 526 and 538, unless otherwise exempted by rule, are subject to the recordation requirements pursuant to Section A.1.
Market Regulation Advisory Notice RA1203-3 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 each leg of any block eligible spread or combination trade must be executed at a single price.
5. Block Trade Price Reporting Requirements (in part)
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 J.P. Morgan Securities LLC (“JPMS”) neither admitted nor denied the rule violations upon which the penalty is based, on January 20, 2015, a Panel of the CME Business Conduct Committee found that it had jurisdiction over JPMS pursuant to CME Rules 400 and 402 as JPMS is a CME member. The Panel also found that between March 9, 2010, and May 28, 2013, JPMS, in connection with block trades in various CME contracts: (i) reported inaccurate execution times for certain block trades; (ii) failed to report certain block trades within the allowable time following execution; (iii) did not maintain order tickets or other acceptable records of executed block trades on more than one occasion; and (iv) reported two block-eligible spread trades in Foreign Exchange futures with individual legs that were not executed at a single price. The Panel concluded that JPMS thereby violated CME Rules 526 and 536.
In accordance with the settlement offer, the Panel ordered JPMS to pay a $40,000 fine.
January 22, 2015
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