EXCHANGE RULE: 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 that Tarek El-Mdaka (“El-Mdaka”) presented at a hearing on January 15, 2015, in which El-Mdaka neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“Panel”) found that El-Mdaka is subject to the jurisdiction of the Exchange as a COMEX member and that on various dates from January 2014 through April 2014, El-Mdaka entered buy/sell orders in the Gold Futures contract from one Kaloti account and directed Kaloti traders to trade opposite his orders from another Kaloti account for the purpose of closing out positions at a clearing firm. The Panel found that El-Mdaka failed to diligently supervise these traders in that he was not familiar with Exchange rules and directed them to engage in wash trades, in violation of Exchange rules.
The Panel found that as a result of the foregoing, El-Mdaka violated Exchange Rules 534.
In accordance with the settlement offer, the Panel ordered El-Mdaka to pay a fine to the Exchange in the amount of $10,000. The Panel also suspended El-Mdaka 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 January 20, 2015 through January 26, 2015, inclusive.
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