Nomura Securities Co., Ltd.
Rule 432. General Offenses
It shall be an offense:
W. for a Member to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange.
Rule 534. Wash Trades Prohibited
No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, 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 shall 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.
Rule 539. Prearranged, Pre-Negotiated and Noncompetitive Trades Prohibited
539.A. General Prohibition
No person shall prearrange or pre-negotiate any purchase or sale or noncompetitively execute any transaction, except in accordance with Sections B. and C. below.
539.C. Pre-Execution Communications Regarding Globex Trades
Parties may engage in pre-execution communications with regard 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:
3. In the case of futures orders, the first party’s order must be entered into the Globex platform first and the second party’s order may not be entered into the Globex platform until a period of 5 seconds has elapsed from the time of entry of the first order.
Pursuant to an offer of settlement that Nomura Securities Co., Ltd. (“Nomura”) presented at a hearing on November 8, 2012, in which Nomura neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“Panel”) found that Nomura is subject to the jurisdiction of the Exchange because it is an affiliate of a COMEX member and that on September 21, 2011, two traders employed by Nomura prearranged five trades totaling 600 lots of December 2011 Gold futures contracts for the purpose of transferring positions between two proprietary accounts with common beneficial ownership as part of Nomura’s migration of its commodities business, including positions used for hedging, from its Fixed Income Department to its Equities Department. The Panel also found that the trades were executed on Globex with the buy and sell orders being entered less than 5 seconds apart. The Panel also found that Nomura failed to diligently supervise its traders in a manner sufficient to ensure that they were familiar with Exchange rules such as through appropriate compliance training.
The Panel found that as a result of the foregoing, Nomura violated Exchange Rules 432.W., 534 and 539.A. and C.
In accordance with the settlement offer, the Panel ordered Nomura to pay a fine to the Exchange in the amount of $50,000.
November 12, 2012
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