CME RULE VIOLATIONS:
Rule 539.C. - PRE-EXECUTION COMMUNICATIONS REGARDING GLOBEX TRADES
Parties may engage in pre-execution communications with regard to transactions executed on the Globex platform where one party (the first party) wishes to be assured that a contra party (the second party) will take the opposite side of the order under the following circumstances:
(4) In the case of options orders, subsequent to the pre-execution communication, a Request for Quote (“RFQ”) for the particular option or option spread or combination must be entered into Globex. Thereafter, in equity and interest rate options, a Request for Cross (“RFC”) order which contains both the buy and the sell orders must be entered into Globex no less than five (5) seconds and no more than thirty (30) seconds after the entry of the RFQ in order to proceed with the trade. In all other options, the RFC order must be entered no less than fifteen (15) seconds and no more than thirty (30) seconds after the entry of the RFQ in order to proceed with the trade. The RFQ and the RFC order must be entered within the same trading session. Failure to enter the RFC order within 30 seconds after the entry of the RFQ will require a new RFQ to be entered prior to the entry of the RFC order, which must be entered in accordance with the time parameters described above in order to proceed with the trade.
Pursuant to an offer of settlement in which Sunil Arora (“Arora”) neither admitted nor denied the rule violations upon which the penalty is based, on January 20, 2015, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel”) found that it had jurisdiction over Arora pursuant to Rules 400 and 402 as the conduct occurred while Arora was an employee of an affiliate of a CME clearing member firm. The Panel also found that on numerous occasions between January 11, 2012, and May 29, 2013, Arora engaged in pre-execution communications related to Eurodollar Options orders, and subsequently crossed the opposing customer buy and sell orders on the CME Globex electronic trading platform (“Globex”) without, in the in the majority of these instances, entering a Request for Quote (“RFQ”) followed by a Request for Cross (“RFC”). In the remaining instances, Arora entered either an RFQ or an RFC but not both prior to crossing the orders on Globex. The Panel concluded that Arora thereby violated CME Rule 539.C.4.
In accordance with the settlement offer, the Panel ordered Arora to pay a fine of $60,000, and to have his access to all CME Group trading floors and direct access to all electronic trading and clearing platforms owned or controlled by CME Group suspended beginning on the effective date below and continuing for a period of 30 business days from the date that the ordered fine is paid in full.
January 22, 2015
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