CME RULE VIOLATIONS:
Rule 532. Disclosing Orders Prohibited (in part)
…[N]o person shall disclose another person’s order to buy or sell except to a designated Exchange official or the CFTC, and no person shall solicit or induce another person to disclose order information. An order for pit execution is not considered public until it has been bid or offered by open outcry. No person shall take action or direct another to take action based on non-public order information, however acquired. The mere statement of opinions or indications of the price at which a market may open or resume trading does not constitute a violation of this rule.
Rule 539. Prearranged, Pre-Negotiated and Noncompetitive Trades Prohibited (in part)
A. General Prohibition
No person shall prearrange or pre-negotiate any purchase or sale or noncompetitively execute any transaction…
Pursuant to an offer of settlement in which Paul Reeves (“Reeves”) neither admitted nor denied the rule violations upon which the penalty is based, on May 21, 2015, a Panel of the CME Business Conduct Committee (“Panel”) found that it had jurisdiction over Reeves pursuant to Rules 400 and 402 as the conduct occurred while Reeves was an employee of a CME member firm. The Panel also found that on April 20, 2012, Reeves received a customer order to sell a put spread in Eurodollar options on futures. Subsequently, the same customer placed a buy order for a put option at a different strike price. Upon receiving the buy order, Reeves instructed the pit to package the separate customer orders as a single strategy. At the same time, a second customer had a pending order to buy the put spread in the pit. Once the single strategy was relayed to the pit, Reeves then solicited and received an order from the second customer to take the opposite side of the single strategy he packaged for execution in the pit. As a result, Reeves prearranged the two customer orders to ensure that they traded opposite each other. The Panel concluded that Reeves thereby violated CME Rule 539.A.
The Panel also found that on March 23, 2012, Reeves, after his colleague received a customer buy order in Eurodollar options on futures, contacted a second customer who was only able to receive a partial fill on a prior sell order. Reeves then suggested a potential trade for the same quantity as the buy order, and disclosed the buy-customer’s nonpublic order information in order to secure the customer’s sell order. The Panel further found that Reeves entered the buy and sell orders into the pit only after securing both sides of the transaction. As a result of the prearrangement, the orders traded in full opposite each other. The Panel concluded that Reeves thereby violated CME Rules 532 and 539.A.
In accordance with the settlement offer, the Panel ordered Reeves to pay a fine of $30,000 and serve a ten business day suspension of access to any CME Group Inc. trading floor and of direct access to all electronic trading and clearing platforms owned or controlled by CME Group, Inc., including CME Globex. The suspension shall run from June 22, 2015, through July 6, 2015, inclusive.
May 26, 2015
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