CME RULE VIOLATIONS:
Rule 534 (“Wash Trades Prohibited”)(in part)
No person shall place or accept buy and sell orders in the same product and expiration month . . . 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 should 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.
Pursuant to an offer of settlement in which Case Gabel (“Gabel”) neither admitted nor denied the rule violation upon which the penalty is based, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel”) found that Gabel was subject to the jurisdiction of the Exchange pursuant to Rules 402 and 418. The Panel also found that on one occasion in February 2012 and multiple occasions in August 2012, Gabel entered matching buy and sell orders on the CME Globex trading platform in Live Cattle futures contracts for accounts with common beneficial ownership on both sides of the market. The matching buy and sell orders were entered with the knowledge and intent that the orders would match opposite one another for the purpose of freshening long futures positions dates. As a result of these wash trades, 67 February 2012 – April 2012 Live Cattle spreads and 173 August 2012 Live Cattle futures contracts were traded between the accounts with common beneficial ownership. Additionally, on one occasion in August 2012, Gabel’s wash trades resulted in as much as 50% of short intents being reassigned for delivery to other long-position holders. The Panel concluded that Gabel thereby violated CME Rule 534.
In accordance with the settlement offer, the Panel ordered Case Gabel to pay a fine of $30,000 and suspended his direct access to any trading floor or electronic trading or clearing platform owned or operated by CME Group, including Globex, for five business days. Gabel’s suspension will run from March 11, 2016, to March 17, 2016, inclusive.
March 4, 2016
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