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.
Rule 432. General Offenses
It shall be an offense:
B.1. to engage in fraud or bad faith;
D. to create or report a false or fictitious trade;
Q. to commit an act which is detrimental to the interest or welfare of the Exchange or to engage in any conduct which tends to impair the dignity or good name of the Exchange.
Following a full evidentiary hearing on the merits, on February 28, 2014, a Panel of the NYMEX Business Conduct Committee (“Panel”) issued a written decision finding that Jeffrey Schondorf (“Schondorf”), a NYMEX member: 1) executed wash trades in the JUL11-AUG11 RBOB spread contract on December 31, 2010 and in the JUN11-JUL11 RBOB spread contract on January 3, 2011 and January 4, 2011, in violation of NYMEX Rule 534; 2) created fictitious volume of the JUL11-AUG11 RBOB spread contract on December 30, 2010 and the JUN11-JUL11 RBOB spread contract on January 3, 2011 and January 4, 2011, in violation of NYMEX Rule 432.B.1; 3) created fictitious trades in the JUL11-AUG11 RBOB spread contract on December 31, 2010 and in the JUN11-JUL11 RBOB spread contract on January 3, 2011 and January 4, 2011, in violation of NYMEX Rule 432.D.; and 4) executed wash trades at prices that benefitted his existing positions on December 31, 2010, January 3, 2011 and January 4, 2011 and thereby affected settlement prices calculated and reported by NYMEX, in violation of NYMEX Rule 432.Q. The Panel also found Schondorf not guilty of intentionally attempting to manipulate and/or actually manipulating the settlement price of the JUL11-AUG11 RBOB spread contract on December 31, 2010 and the JUN11-JUL11 RBOB spread contract on January 3, 2011 and January 4, 2011, which would have been a violation of NYMEX Rule 432.H.
Based on the record and the Panel’s findings and conclusions, the Panel ordered Schondorf to pay a $30,000 fine. The Panel also suspended Schondorf from membership privileges on any CME Group, Inc. exchange, access to all CME Group Inc. trading floors, and direct and indirect access to all electronic trading and clearing platforms owned or controlled by CME Group Inc., including Globex, for a period of 30 business days. The suspension will run from March 17, 2014 through and including April 28, 2014.
March 14, 2014
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