Timothy P. Roach
CBOT RULE VIOLATION:
Rule 575 (DISRUPTIVE PRACTICES PROHIBITED) (in part)
All orders must be entered for the purpose of executing bona fide transactions. Additionally, all non-actionable messages must be entered in good faith for legitimate purposes.
A. No person shall enter or cause to be entered an order with an intent, at the time of order entry, to cancel the order before execution or to modify the order to avoid execution.
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.
Pursuant to an offer of settlement in which Timothy P. Roach (“Roach”) neither admitted nor denied the rule violations upon which the penalty is based, on November 27, 2018, a Panel of the Chicago Board of Trade Business Conduct Committee (“Panel”) found that from February 1, 2016, to July 26, 2016, Roach entered and cancelled multiple layered orders on one side of the March 2016, May 2016, July 2016 and November 2016 Soybean futures markets, without the intent to trade. Specifically, Roach layered orders on one side of the order book and as other market participants joined his resting orders or bettered the bid/offer, he placed a smaller order on the opposite side of the same market. Once the smaller order traded, he cancelled the layered orders on the opposite side of the market.
The Panel also found that during the same time period and in the same markets, Roach entered orders on one side of the market at the best bid/offer without the intent to trade. After other market participants joined his resting orders, Roach entered an aggressive order on the other side of the market at the same book level. Roach used self-match prevention (“SMP”) software, which caused his resting orders to be cancelled within the same millisecond of entry of the aggressive order. The aggressive order then immediately traded opposite the market participant who joined or bettered Roach’s resting bid/offer and turned the market (“flip order”).
The Panel also found that on May 3, 2017, in the July 2017 Soybean futures market, Roach entered and cancelled layered orders on one side of the market without the intent to trade. Specifically, Roach entered layered orders opposite his iceberg orders resting on the other side of the market. Once other market participants joined his layered orders, Roach modified the resting iceberg orders to the same price as several of his layered orders on the opposite side of the book. The modified iceberg orders triggered SMP, which first cancelled his layered orders before aggressively trading opposite the other market participants.
The Panel thereby concluded that Roach violated CBOT Rules 575.A. and 575.D.
In accordance with the settlement offer, the Panel ordered Roach to: 1) pay a $90,000 fine; 2) pay disgorgement in the amount of $11,178.88; and 3) serve a 30-day suspension of any access to any CME Group Inc. trading floor and of 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 November 29, 2018, through December 29, 2018, inclusive.
November 29, 2018