CME RULE VIOLATION:
Rule 534. Wash Trades Prohibited
No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means.
Market Regulation Advisory Notice RA0913-5 FAQ (Excerpt)
Q11- Under what circumstances is trading with oneself on the electronic platform a violation of exchange rules regarding wash trading?
A11- Rule 534 provides that buy and sell orders for accounts with common beneficial ownership must be entered in good faith for the purpose of making bona fide transactions. Thus, it is a violation of Rule 534 for a market participant to enter an order on the electronic system that he knew or should have known would match with a resting order on the other side of the market for an account with common beneficial ownership. Generally, an unintentional and incidental matching of such buy and sell orders will not be considered a violation of Rule 534. However, active traders who frequently enter orders on opposing sides of the market which may have a tendency to cross are strongly encouraged to employ functionality designed to minimize or eliminate their buy and sell orders from matching with each other.
Pursuant to an offer of settlement in which Miikka Hautamaki (“Hautamaki”) neither admitted nor denied the rule violation upon which the penalty is based, and after Hautamaki voluntarily submitted himself to the jurisdiction of the BCC for purposes of settling this matter, on February 11, 2014, a Panel of the CME Business Conduct Committee found that on several occasions between August 1, 2009 and June 9, 2010, Hautamaki executed trades in the E-mini S&P 500 futures contract on the CME Globex electronic trading platform (“Globex”) where his account was on both the sell and buy sides of the transaction, resulting in no change in beneficial ownership. While Hautamaki did not specifically intend his orders to match, he knew, or should have known, they would match. The Panel concluded that in so doing, Hautamaki violated CME Rule 534.
In accordance with the settlement offer and in consideration of other factors in mitigation, the Panel fined Hautamaki $5,000. The Panel also suspended Hautamaki for a period of 50 business days from directly or indirectly accessing, placing orders or executing trades on any trading or clearing platform owned, controlled or operated by CME Group Inc., including, but not limited to, CME Globex, beginning on the effective date below and continuing through and including April 24, 2014.
February 13, 2014
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