• NOTICE OF DISCIPLINARY ACTION

      • #
      • CBOT-15-0160-BC-2
      • Effective Date
      • 26 September 2018
    • FILE NO.:

      CBOT 15-0160-BC

      MEMBER:

      Adam Flavin

      CBOT RULE VIOLATIONS:

      Rule 432 (“General Offenses”) (in relevant part)

      It shall be an offense:

      H. to… attempt to engage in, the manipulation of prices of Exchange futures or options contracts;

      J. to knowingly disseminate …false, misleading or inaccurate information concerning crop or market information or conditions that affect or may affect the price of any Exchange futures or options contract or spot transaction in the underlying commodity;

      FINDINGS:

      Pursuant to an offer of settlement in which Adam Flavin (“Flavin”) neither admitted nor denied the rule violations or factual findings upon which the penalty is based, on September 18, 2018, a Panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee (“Panel”) found that in March 2015, Flavin engaged in a strategy in which he acquired, on behalf of his employer, certificates and loaded out wheat for delivery in order to send false or misleading signals to the market of demand, in an attempt to manipulate the price of Wheat futures contracts and benefit his employer’s futures and options positions at CBOT.

      Specifically, the Panel found that prior to March 2015, Flavin knew that his employer held 134 Soft Red Winter Wheat certificates (“SRW certificates”). On March 3, 2015, 250 SRW certificates (1.25 million bushels) of 3 part per million vomitoxin SRW certificates were registered for delivery against CBOT futures, bringing the total amount of registered certificates to 384. Between March 5 and 10, 2015, Flavin arranged to acquire all 250 remaining SRW certificates and, therefore, his employer held all 384 SRW certificates. At the same time Flavin entered, on behalf of his employer, into a large speculative position using futures and options. Flavin also contacted multiple market participants and a daily cash wheat newsletter to notify them of his intention to cancel the SRW certificates for load out, thereby attempting to influence the market to benefit his employer’s futures and options positions.

      From March 6 through March 11, 2015, Flavin canceled for load out all SRW certificates in an attempt to send a false or misleading signal of demand to the market. Flavin’s strategy was devised primarily to benefit his employer’s futures and options positions.

      The Panel concluded that Flavin thereby violated CBOT Rules 432.H. and 432.J.

      PENALTY:

      In accordance with the settlement offer and after considering the $125,000 fine ordered to be paid to the Commodity Futures Trading Commission in a related matter against Flavin, the Panel ordered Flavin to pay a fine of $125,000 to the Exchange and to have his access to all CME Group trading floors and direct and indirect access to all electronic trading and clearing platforms owned or controlled by CME Group suspended for a period of four years. The suspension shall run from September 26, 2018 through September 26, 2022.

      EFFECTIVE DATE:

      September 26, 2018