NOTICE OF DISCIPLINARY ACTION

NON-MEMBER:

Larry C. Johnson

CME RULE VIOLATIONS:

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 (in part)

It shall be an offense:

B.1. to engage in…bad faith.

FINDINGS:

Pursuant to an offer of settlement in which Larry C. Johnson neither admitted nor denied the rule violations upon which the penalty is based, on October 4, 2016, a Panel of the CME Business Conduct Committee (“Panel”) found that Johnson was subject to the BCC’s jurisdiction pursuant to CME Rules 402 and 418. The Panel also found that on three occasions from September 26, 2013, through January 24, 2014, Johnson placed buy and sell orders through a broker for S&P 500 Options and Flex Options on Futures in the same expiration months, strike prices, and at the same trade prices, while he knew—or reasonably should have known—that the purpose of these orders was to avoid taking a bona fide market position exposed to market risk. It is further alleged that during December 2013 and January 2014, Johnson knowingly had the sell side of the transactions misallocated to accounts other than the ones in which the trades were ultimately allocated. The purpose of these transactions in this fashion was to avoid maintenance margin requirements. The Panel concluded that Johnson thereby violated CME Rules 534 and 432.B.1.

PENALTY:

In accordance with the settlement offer, the Panel ordered Johnson to pay a $35,000 fine, and suspended his direct access to any trading floor or electronic trading or clearing platform owned or operated by CME Group, including CME Globex, for five business days. Johnson’s suspension will run from October 6, 2016, through October 12, 2016, inclusive

EFFECTIVE DATE:

October 6, 2016.