CME RULE VIOLATIONS:
432. General Offenses (in part)
It shall be an offense:
B. 1. to engage in fraud or bad faith;
2. to engage in conduct or proceedings inconsistent with just and equitable principles of trade;
C. to engage in dishonest conduct;
G. to prearrange the execution of transactions in Exchange products for the purpose of transferring equity between accounts;
L. 1. to fail to appear before the Board, Exchange staff or any investigative or hearing committee at a duly convened hearing, scheduled staff interview or in connection with any investigation.
576. Identification of Globex Terminal Operators
Each Globex terminal operator shall be identified to the Exchange, in the manner prescribed by the Exchange, and shall be subject to Exchange Rules. If user IDs are required to be registered with the Exchange, it is the duty of the clearing member to ensure that registration is current and accurate at all times. Each individual must use a unique user ID to access Globex. In no event may a person enter an order or permit the entry of an order by an individual using a user ID other than the individual’s own unique user ID.
On April 3, 2014, a Panel of the Chicago Mercantile Exchange (“CME”) Probable Cause Committee (“PCC”) charged non-member Alexey Novichenko, a resident of Voskresensk, Russia, with violating CME Rules 432.B.1., 432.B.2., 432.C., 432.G., 432.L.1., and 576, based on allegations that on June 22, 2011, Novichenko prearranged the execution of transactions in deferred-month E-mini Euro/U.S. Dollar, E-mini S&P Midcap 400, and Oats futures contracts using both his own user ID and the user ID of another for the purpose of transferring equity between his account and the account of another, and that he failed to appear at a scheduled interview in connection with an investigation. The orders for these trades were entered for equal quantities on opposite sides of the market at or near the same time. The resulting positions were reversed in a similar manner for a profit to Novichenko’s account and a corresponding loss to the opposing account.
On September 25, 2014, and in accordance with Rule 407.C., a Hearing Panel Chair of the CME Business Conduct Committee (“BCC”) found that Novichenko had failed to answer charges issued against him by the CME PCC. The Hearing Panel Chair accordingly ruled that the charges issued were deemed admitted, and through this admission Novichenko had waived his right to a hearing on the merits of the charges.
On October 9, 2014, a Panel of the CME BCC found that Novichenko committed the violations contained in the admitted charges, and subsequently held a penalty hearing.
Based on the record and the Panel’s findings and conclusions, the Panel ordered that Novichenko be barred permanently from (1) applying for membership at any CME Group exchange; (2) direct or indirect access and use of any trading floor, electronic trading platform or clearing platform owned or operated by any CME Group exchange; and (3) affiliation with, employment by, or association with a Member (as this term is defined in Rule 400) or affiliate of a Member of any CME Group exchange.
November 11, 2014
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