VALERO MARKETING AND SUPPLY COMPANY
EXCHANGE RULES: NYMEX RULE 432: GENERAL OFFENSES (in part)
It shall be an offense:
W. for a Member to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange;
NYMEX 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 Valero Marketing and Supply Company (“Valero”) presented at a hearing on June 12, 2014, in which Valero neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the NYMEX Business Conduct Committee (“BCC Panel”) found that it had jurisdiction over Valero because it is a NYMEX member and that on September 28, 2011 and September 29, 2011, a trader employed by an affiliate of Valero entered a series of wash trades in the October 2011 RBOB contract between accounts with the same beneficial owner during the last three days prior to expiration of the October 2011 RBOB contract. The BCC Panel found that the trader was the sole decision maker for both the buy and sell side of the trades. The BCC Panel also found that Valero failed to diligently supervise its trader in a manner sufficient to ensure that he was familiar with Exchange rules.
The BCC Panel found that as a result, Valero violated NYMEX Rules 432.W and 534.
In accordance with the settlement offer, the BCC Panel ordered Valero to pay a fine to the Exchange in the amount of $30,000.
June 16, 2014
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