NYMEX RULE VIOLATIONS:
NYMEX LEGACY RULE 8.55 – CLASSIFICATION OF OFFENSES
(A) Major Offenses
No Member, Member Firm, or any employee of the foregoing shall commit a violation of any of the following rules, which shall be deemed major offenses of the Exchange.
(18) to commit an act which is substantially detrimental to the interests or welfare of the Exchange;
(a) To fail to supervise any employee of a Member or Member Firm adequately to prevent the violation by such employee of any Exchange Rule that: (i) results in substantial detriment to the welfare and interests of the Exchange; (ii) results in harm to a customer or another Member or Member Firm; or (iii) otherwise constitutes a Major Offense
Pursuant to an offer of settlement Peter Iocolano (“Iocolano”) presented at a hearing on July 31, 2013, in which Iocolano neither admitted nor denied the rule violation upon which the penalty is based, a Panel of the NYMEX Business Conduct Committee (“BCC”) found that it had jurisdiction over Iocolano pursuant to NYMEX Rules 400 and 402 as the conduct occurred while Iocolano was a NYMEX member, and that on four occasions during the time period of May 2008 to July 2008, while executing trades for customers as a broker for ESCO Commodities (“ESCO”), Iocolano executed orders to sell out-of-the-money Crude Oil option contracts on the day/days immediately prior to the option contract’s expiration. ESCO’s clerks initially allocated the sold options to dormant or closed accounts with the understanding that a customer was trying to avoid margin calls. After the period when margin on those contracts were due, ESCO’s clerks reallocated the trades to the appropriate account. Iocolano failed to supervise ESCO’s clerks and permitted the allocation of sold options to dormant or closed accounts in order to facilitate a customer’s margin avoidance scheme.
The Panel found that, as a result, Iocolano violated Legacy NYMEX Rules 8.55(A)(18) (Act Substantially Detrimental to the Interests of the Exchange) and 8.55(A)(23)(Failure to Adequately Supervise Employees).
In accordance with the settlement offer, the Panel ordered Iocolano to pay a fine in the amount of $85,000. The Panel also suspended Iocolano 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 4 weeks. The suspension will run from August 2, 2013 through August 29, 2013.
August 2, 2013
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