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.
RULE 539. PREARRANGED, PRE-NEGOTIATED AND NONCOMPETITIVE TRADES PROHIBITED
539.A. General Prohibition
No person shall prearrange or pre-negotiate any purchase or sale or noncompetitively execute any transaction, except in accordance with Sections B. and C. below.
539.C. Pre-Execution Communications Regarding Globex Trades
Parties may engage in pre-execution communications with regard to transactions executed on the Globex platform where one party (the first party) wishes to be assured that a contra party (the second party) will take the opposite side of the order under the following circumstances:
3. In the case of futures orders, the first party’s order must be entered into the Globex platform first and the second party’s order may not be entered into the Globex platform until a period of 5 seconds has elapsed from the time of entry of the first order.
Pursuant to an offer of settlement Deepak Agrawal (“Agrawal”) presented at a hearing on September 23, 2014, in which Agrawal 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 Agrawal pursuant to Rules 402 and 418, and on January 21, 2013, Agrawal pre-arranged the execution of trades with another trader in the Natural Gas Futures contract between two accounts with the same beneficial owner in order to offset positions between these commonly owned accounts. The trades were executed on Globex and the buy and sell orders were entered less than five seconds of each other. The Panel found that in each of these instances, Agrawal was the sole decision maker for both the buy and sell side of the trade. The Panel also found that Agrawal failed to diligently supervise the trader in that he was not familiar with Exchange rules and pre-arranged the execution of these wash trades with that trader, in violation of Exchange rules.
The Panel found that as a result of the foregoing, Agrawal violated Exchange Rules 432.W., 534, and 539.A. and C.
In accordance with the settlement offer, the BCC Panel ordered Agrawal to pay a fine to the Exchange in the amount of $10,000. The Panel also suspended Agrawal 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 5 business days. The suspension will run from September 25, 2014 to October 1, 2014, inclusive.
September 25, 2014
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