Dominick A. Cognata
Rule 432. General Offenses
It shall be an offense:
G. to prearrange the execution of transactions in Exchange products for the purpose of transferring equity between accounts;
Rule 521: Requirements for Open Outcry Trades
In open outcry trading, bidding and offering practices must at all times be conducive to the competitive execution of transactions. All open outcry transactions, including spread and combination transactions, shall be made openly and competitively in the pit designated for the trading of the particular transaction. No bid or offer shall be specified for acceptance by a particular trader. Transactions may take place only at the best price available in the open outcry market at the time the trade occurs. It shall be the duty of both traders to confirm their trades as to the price, quantity, commodity, contract month, respective clearing members and, for options, strike price, put or call and expiration month. Confirmation shall take place as soon as possible, but in no event more than 15 minutes after the trade.
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:
4. In the case of options orders, subsequent to the pre-execution communication, a Request for Quote (“RFQ”) for the particular option or option spread or combination must be entered into Globex. Thereafter, in equity and interest rate options, a Request for Cross (“RFC”) order which contains both the buy and the sell orders must be entered into Globex no less than five (5) seconds and no more than thirty (30) seconds after the entry of the RFQ in order to proceed with the trade. In all other options, the RFC order must be entered no less than fifteen (15) seconds and no more than thirty (30) seconds after the entry of the RFQ in order to proceed with the trade. The RFQ and the RFC order must be entered within the same trading session. Failure to enter the RFC order within 30 seconds after the entry of the RFQ will require a new RFQ to be entered prior to the entry of the RFC order, which must be entered in accordance with the time parameters described above in order to proceed with the trade.
Pursuant to an offer of settlement that Dominick Cognata (“DBOY”) presented at a hearing on February 12, 2013 in which DBOY neither admitted nor denied the findings or the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“Panel”) found that on June 14, 2011, June 17, 2011, and July 12, 2011, DBOY prearranged round-turn trades in Silver Options on the trading floor for the purpose of receiving money passes from other COMEX members.
The Panel found that as a result of the foregoing, DBOY violated Exchange Rules 432.G, 521 and 539.A. and C.
In accordance with the settlement offer, the Panel ordered DBOY to pay a fine to the Exchange in the amount of $20,000. The Panel also suspended DBOY from all membership privileges and direct or indirect access to any trading floor or electronic trading or clearing platform owned or operated by CME Group Inc., including Globex, for a period of 20 business days. The suspension will run from February 14, 2013 through February 28, 2013 and then April 1, 2013 through April 12, 2013.
February 14, 2013