CME RULE VIOLATIONS:
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.
539. PREARRANGED, PRE-NEGOTIATED AND NON-COMPETITIVE TRADES PROHIBITED
A. No person shall prearrange or pre-negotiate any purchase or sale or non-competitively execute any transaction.
Pursuant to an offer of settlement in which Kevin Smith neither admitted nor denied any rule violations upon which the penalty is based, on March 29, 2012, a panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee found that on one or more occasions between October 11 and October 12, 2010, Smith executed a series of trades on the CME Globex® electronic trading platform by pre-arranging transactions in the Live Cattle market with another member, and by so doing, engaged in indirect wash transactions in an attempt to freshen the dates of his previously established positions. The panel found that in doing so, Kevin Smith violated CME Rules 539.A and 534.
In accordance with the offer of settlement, the Panel fined Kevin Smith $15,000 and suspended his direct access to any trading floor or electronic trading or clearing platform owned or operated by CME Group, including CME Globex® for 15 business days. Smith’s suspension will run from April 2, 2012 through April 20, 2012, inclusive.
April 2, 2012
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