• NOTICE OF DISCIPLINARY ACTION

      • #
      • COMEX-10-07511-BC
      • Effective Date
      • 11 August 2011
    • FILE NO.:

      COMEX 10-07511-BC

       

      MEMBER:

      DOMINICK COGNATA (DBOY)

       

      COMEX RULE VIOLATIONS:

       

      Legacy COMEX Rule 104.21 – OPEN OUTCRY

      Except to the extent otherwise permitted by the By-Laws and Rules, every order to buy and sell, and every purchase and sale of, a futures contract or futures option must be offered or executed openly and competitively by public outcry in a ring specified in the By-Laws and Rules.

       

      Legacy COMEX Rule 104.27 – PREARRANGED TRADES

      Except to the extent permitted by the By-Laws and Rules, members are prohibited from making, or attempting to make, any purchase of sale of a futures contract or futures option which directly or indirectly has been prearranged.

       

      Legacy COMEX Rule 104.34 – WITHHOLDING ORDERS

      A floor member is prohibited from withholding or withdrawing from the market all or part of an order of another person for the convenience of another member.

       

      NYMEX RULE VIOLATIONS:

       

      Legacy NYMEX Rule 8.55 – CLASSIFICIATION OF OFFENSES

      (A) Major Offenses – No Member, Member Firm, or any employee of the foregoing shall commit a violation of any of the following rules, which shall be deemed major offenses of the Exchange.

      (18) to commit an act which is substantially detrimental to the interests or welfare of the Exchange.

       

      Legacy NYMEX Rule 8.55 – CLASSIFICIATION OF OFFENSES

      (B) Minor Offenses – No Member, Member Firm, or any employee of the foregoing shall commit a violation of any of the following rules, which shall be deemed minor offenses of the Exchange.

      (2) to engage in conduct inconsistent with just and equitable principles of trade. 

       

      FINDINGS:

      Pursuant to an offer of settlement in which Dominick Cognata (“Cognata”) neither admitted nor denied the rule violations upon which the penalty is based for purposes of resolving this matter, on August 9, 2011, a panel of the COMEX Business Conduct Committee (the “Panel”) found that from October 2008 to December 4, 2008, Cognata engaged in four (4) noncompetitive, prearranged trades of COMEX Silver and Gold options while in possession of executable customer orders that he withheld from the marketplace and allowed other select traders to realize gains by noncompetitively trading opposite these orders. As a result of these trades, the customer orders were disadvantaged by $44,700.

       

      Further, the Panel found that on November 13, 2008, Cognata engaged in a noncompetitive, prearranged trades of COMEX Silver options opposite another broker’s customer order without bidding or offering in the ring.

       

      Finally, the Panel found that on November 21, 2008, Cognata accepted a profiting round-turn transaction into his personal account that was executed noncompetitively by another trader. As a result of these trades Cognata profited $1,400 in ill-gotten gains.

       

      The Panel found that in so doing, Cognata violated Legacy COMEX Rules 104.21, 104.27, 104.34, and Legacy NYMEX Rules 8.55(A)(18) and 8.55(B)(2).

       

      PENALTY:

      In accordance with the settlement offer, the Panel ordered Cognata to (i) pay a fine to the Exchange in the amount of $135,000; (ii) disgorge $1,400 in ill-gotten gains; (iii) pay restitution to Cognata’s customers in the amount of $44,700; and (iv) serve a suspension for a period beginning on the effective date of the Committee’s decision and lasting two (2) weeks from the date the fine is paid in full of his 1) membership privileges; 2) access to all CME Group Inc. trading floors; and 3) direct access to all electronic trading and clearing platforms owned or controlled by CME Group, including CME Globex.

       

      EFFECTIVE DATE:

      August 11, 2011