CME RULE VIOLATIONS:
Rule 432. General Offenses (in part)
It shall be an offense:
G. to prearrange the execution of transactions in Exchange products for the purpose of transferring equity between accounts.
Rule 539. Prearranged, Pre-Negotiated and Noncompetitive Trades Prohibited (in part)
A. No person shall prearrange or pre-negotiate any purchase or sale or noncompetitively execute any transaction . . .
On November 12, 2012, a Panel of the Chicago Mercantile Exchange (“CME”) Probable Cause Committee (“PCC”) charged non-member Deepak Singhal, a resident of Bangalore, Karnataka, India, with one count of violating CME Rule 432.G. (Prearrange Executions to Transfer Equity Between Accounts), and one count of violating CME Rule 539. (Prearranged, Pre-Negotiated and Noncompetitive Trades Prohibited), based on allegations that on 10 trade dates between December 12 and 30, 2010, Singhal executed 112 trades in Foreign Exchange options on futures opposite a family member’s account. The orders for these trades were placed in illiquid markets with little to no market depth, for equal quantities on opposite sides of the market, and traded at or near the same time. These positions were then reversed in a similar manner, often opposite each other for a profit to the family member’s account and a loss to Singhal’s account. Further, on nine trade dates during this date range, Singhal executed trades in this manner to effect a money pass of over $118,000 from his account to his family member’s account.
On December 17, 2012, a Hearing Panel Chair of the CME Business Conduct Committee (“BCC”) entered an order finding that Singhal failed to answer charges issued against him. In failing to answer the charges, the Hearing Panel Chair further ordered that Singhal was deemed to have admitted the charges issued and waived his right to a hearing on the merits of the charges.
Pursuant to CME Rule 407.C., a penalty hearing was held before a Panel of the CME BCC (“BCC Panel”) on December 20, 2012. The BCC Panel found Singhal guilty of committing the admitted charges.
In determining the appropriate sanction, the Panel took into consideration that on November 28, 2012, as part of a settlement agreement between Singhal and the Commodity Futures Trading Commission (“CFTC”), U.S. District Court Judge Amy J. St. Eve entered a Consent Order for Permanent Injunction, Civil
Monetary Penalty and Other Equitable Relief against Singhal for related trading activity (Civil Action No. 1:12-cv-00138). After considering this action by the CFTC, and all of the issues discussed above, the Panel ordered Singhal to cease and desist from the conduct found to be in violation of CME Rules 432.G. and
December 24, 2012
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