RULE VIOLATIONS: Rule 432. GENERAL OFFENSES
It shall be an offense to:
B.2. engage in conduct or proceedings inconsistent with just and equitable principles of trade.
Q. 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.
Pursuant to an offer of settlement in which Robert Leeds (“Leeds”) neither admitted nor denied the rule violations upon which the penalty is based, on January 15, 2015, a Panel of the NYMEX Business Conduct Committee (“Panel”) found that Leeds is subject to the jurisdiction of the Exchange pursuant to NYMEX Rules 400 and 402 as the conduct at issue occurred while he was a member of the Exchange.
The Panel also found that on one or more occasions between February 2012 and June 2012, Leeds entered bids and offers in Natural Gas futures contracts without the requisite intent to trade at the time of order entry. These bids and offers were subsequently cancelled by Leeds. Specifically, while Leeds had an order resting on the buy (sell) side of the market, he would enter a large order, often at the top of the book, on the sell (buy) side of the market causing other market participants to trade with his resting buy (sell) order. Once trading ceased on his buy (sell) order, Leeds would completely cancel the large order on the opposite side of the market, often less than a second after it was entered.
In determining that the large orders were entered without the requisite intent to be traded, the Panel considered numerous factors, including the significant imbalance created by these orders, the percentage of large orders cancelled, and the exposure time of the cancelled orders.
The Panel concluded that by engaging in the foregoing conduct, Leeds violated NYMEX Rules 432.B.2. (to engage in conduct or proceedings inconsistent with just and equitable principles of trade) and 432.Q. (to engage in 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).
In accordance with the offer of settlement, the Panel:
1. fined Leeds $40,000; and
2. ordered Leeds to serve a 15 business day suspension 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 CME Globex. The suspension shall run from January 20, 2015, through and including February 9, 2015.
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