EXCHANGE RULES: 575 (DISRUPTIVE PRACTICES PROHIBITED)
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 the intent, at the time of order entry, to cancel the order before execution or to modify the order to avoid execution.
432. General Offenses
T. to engage in dishonorable or uncommercial conduct;
U. except where a power of attorney or similar document has been executed pursuant to Rule 956, for any party to accept or transmit a customer order which has not been specifically authorized.
576. Identification of Globex Terminal Operators
Each Globex terminal operator shall be identified to the Exchange, in the manner prescribed by the Exchange, and shall be subject to Exchange rules. If user IDs are required to be registered with the Exchange, it is the duty of the clearing member to ensure that registration is current and accurate at all times. Each individual must use a unique user ID to access Globex. In no event may a person enter an order or permit the entry of an order by an individual using a user ID other than the individual’s own unique user ID.
Pursuant to an offer of settlement Andrei Sakharov (“Sakharov”) presented at a hearing on August 7, 2018, in which Sakharov neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“BCC Panel”) found that on one or more occasions during the one week period from July 1, 2016 through July 7, 2016, Sakharov entered orders in the Gold futures market with the intent, at the time of order entry, to cancel the order before execution. Specifically, Sakharov knowingly designed and operated an algorithmic trading system (“ATS”) which was specifically programmed to mislead other market participants through spoofing activity. The ATS placed a large order opposite a smaller order to entice market participants to trade into Sakharov’s small order, at which time his ATS would cancel the large order which he did not intend to trade. Sakharov also knowingly traded a customer’s account without proper written trading authorization in place. Following an inquiry from the customer’s introducing broker about this lack of written authorization, Sakharov prepared and backdated a Power of Attorney to trade the customer’s account which reflected the oral agreement that he had in place with the customer. Finally, from January 1, 2016 through July 7, 2016, Sakharov placed orders for multiple trading accounts while knowingly using the Globex I.D.s registered to the owners of those trading accounts.
The Panel found that as a result of the foregoing, Sakharov violated Rules 575.A., 432.T., 432.U. and 576.
In accordance with the settlement offer and considering the 60-day Summary Access Denial previously imposed against him, the BCC Panel ordered Sakharov to pay a $80,000 fine in connection with this case and companion case NYMEX 16-0486-BC ($20,000 of which is allocated to COMEX) and serve a 45 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 August 9, 2018 through September 23, 2018, inclusive.