NOTICE OF DISCIPLINARY ACTION

NON- MEMBER:

Daniel Pires 

CBOT RULE  VIOLATION:

Rule 575. Disruptive Practices Prohibited

D. No person shall enter or cause to be entered an actionable or non-actionable message with intent to disrupt, or with reckless disregard for the adverse impact on, the orderly conduct of trading or the fair execution of transactions.

Market Regulation Advisory Notice Disruptive Practices Prohibited Rule 575 RA1405-5R: (in part)

Q22: Is the creation or execution of User Defined Spreads (“UDS”) for the purposes of deceiving or disadvantaging other market participants a violation of Rule 575?

A22: Yes. Although the CME Globex system provides certain protections such as reasonability checks with respect to option deltas and the futures price on covered instruments, the UDS functionality requires users to exercise diligence and care in the creation of option spread instruments, including the creation of covered option strategies.

Market participants are reminded that knowingly creating and/or trading UDS instruments in a manner intended to deceive or unfairly disadvantage other market participants is considered a violation of Rule 575.

FINDINGS:

Pursuant to an offer of settlement in which Daniel Pires (“Pires”) neither admitted nor denied the rule violation upon which the penalty is based, on February 9, 2017, a Panel of the CBOT Business Conduct Committee (“BCC” or “Panel”) found that between March and June 2015, Pires entered multiple orders in 10-Year U.S. T-Note user-defined covered option spread instruments on the Globex electronic trading platform for the purpose of avoiding the allocation of futures contracts that should have been associated with the covered options instrument. Executing the trades in this manner resulted in more favorable prices for the options instruments than was available in the outright market. The Panel concluded that this activity violated CBOT Rule 575.D.

PENALTY: In accordance with the settlement offer the Panel ordered Pires to pay a fine of $20,000.

EFFECTIVE DATE:

February 13, 2017