CME RULE VIOLATIONS:
Rule 529 Withholding Orders Prohibited
A Member (as defined in Rule 400), or any person entering orders on the Globex platform, shall not withhold or withdraw from the market any order, or any part of an order, for the benefit of any person other than the person placing the order.
Pursuant to an offer of settlement in which Joseph Connolly (“Connolly”) neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel”) found that Connolly was subject to the jurisdiction of the Exchange pursuant to Rules 400 and 402, as the conduct occurred while Connolly was employed by a CME member. The Panel further found that on April 9, 2013, Connolly withheld portions of customer orders for the benefit of obtaining fills on subsequent orders placed by the same customer. Specifically, a customer entered orders to buy 6,500 contracts and sell 12,500 contracts for a spread trade in the Eurodollar options on futures pit. Connolly instructed a broker in his group to execute 6,000 contracts in the pit and 6,500 contracts with another broker in the group. No visible trade for the 6,500 occurred between the brokers in Connolly’s group. Subsequently, the same customer entered orders for an additional 10,000 contracts on the buy side and 5,000 contracts on the sell side. Again, Connolly withheld portions of the orders, as he only instructed the broker handling the buy order to purchase 8,000 contracts. The remaining 2,000 contracts were carded up between brokers within the group, despite no visible trade having occurred. The Panel concluded that by netting and withholding portions of the orders, Connolly thereby violated CME Rule 529.
In accordance with the settlement offer, the Panel ordered Connolly to pay a fine to the Exchange in the amount of $10,000 and serve a five 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 March 30, 2015, through April 3, 2015, inclusive.
March 23, 2015
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