NYMEX RULE VIOLATIONS:
(legacy) Rule 6.11(B) Confirmation of Trades Executed on Trading Floor
Each Trading member executing a purchase or sale, on the Exchange trading floor, or his designated authorized representative, shall be responsible for assuring that such Member’s transactions are properly assigned to the appropriate Clearing Member prior to his leaving the premises of the Exchange.
Rule 432.C. General Offenses – Dishonest Conduct
It shall be an offense to engage in dishonest conduct.
Rule 432.Y. General Offenses – Improper Use of Globex
It shall be an offense to improperly use the Globex platform or any electronic trading or clearing platform owned or controlled by CME Group or permit the unauthorized use of such platforms.
Pursuant to an offer of settlement in which Michael Narotski neither admitted nor denied the rule violations upon which the penalty is based, on January 27, 2011, a Panel of the NYMEX Business Conduct Committee (“BCC Panel”) found that on January 23, 2009, Narotski allocated an 8-lot March 2009 Crude Oil futures round-turn trade he executed for his personal account to an account of a former customer. Prior to allocating this 8-lot round-turn to the former customer, Narotski allocated 5-lots of the opening sell position and 8-lots of the closing buy position to a separate account, not his own. Narotski avoided realizing a $5,160 loss in his own account by allocating this 8-lot round-turn away from his own account. Also on January 23, 2009, Narotski, using another member’s unique username, logged into the trade management system to allocate the subject trades. On January 27, 2009, after Narotski informed the clearing firm holding the former customer account that the 8-lot round-turn trade belonged to Narotski, the positions were transferred back to Narotski. The BCC Panel found that in so doing, Narotski violated legacy NYMEX Rule 6.11(B), and Rules 432.C. and 432.Y. In a decision dated November 2, 2011, an Appellate Panel of the Board of Directors affirmed the decision of the BCC Panel.
In consideration of the offer of settlement, comparable sanctions, the absence of customer harm, and Narotski’s lack of disciplinary history, the BCC Panel ordered that Narotski: (i) cease and desist from future violations of the aforementioned or similar rules; and (ii) pay a fine in the amount of $5,000.
December 19, 2011
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