EXCHANGE RULES: 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.
Pursuant to an offer of settlement Varun Choudhary (“Choudhary”) presented at a hearing on March 26, 2015, in which Choudhary neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“BCC Panel”) found that the Panel had jurisdiction over Choudhary as an employee of a COMEX member pursuant to Rules 400 and 402. The Panel found that during the time period July 2010 through March 2011, Choudhary executed a series of wash trades between Jaypee accounts in order to liquidate concurrent long and short positions and thereby avoid delivery, or to transfer positions between accounts to avoid posting margin. The Panel found that Choudhary was the sole decision-maker for the buy and sell sides of these wash trades.
The Panel found that as a result of the foregoing, Choudhary violated Exchange Rules 534.
In accordance with the settlement offer, the BCC Panel ordered Choudhary to pay a fine to the Exchange in the amount of $5,000. The Panel also suspended Choudhary from all 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 5 business days. The suspension will run from March 30, 2015 through April 6, 2015, inclusive.
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