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 Steven McMane (“McMane”) presented at a hearing August 13, 2014, in which McMane 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 McMane was subject to the jurisdiction of the Exchange pursuant to Rules 402 and 418 and that during the time period August 2012 to November 2012, McMane executed trades in the Crude Oil Futures contract between three accounts with the same beneficial owner in order to offset positions in the expiring contract. Furthermore, McMane directed other traders to execute trades opposite each other in order to offset positions between these commonly owned accounts. The Panel found that McMane failed to diligently supervise these traders in that he was not familiar with Exchange rules and directed them to engage in wash trades, in violation of Exchange rules. The Panel also found that in each of these instances, McMane was the sole decision maker for both the buy and sell side of the trade.
The BCC Panel found that as a result, McMane violated NYMEX Rules 432.W and 534.
In accordance with the settlement offer, the BCC Panel ordered McMane to pay a fine to the Exchange in the amount of $15,000. The Panel also suspended McMane 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 August 15, 2014 to August 21, 2014, inclusive.
August 15, 2014
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