• NOTICE OF DISCIPLINARY ACTION

      • #
      • CBOT-17-0634-BC-2
      • Effective Date
      • 05 October 2018
    • FILE NO.:

      CBOT 17-0634-BC

      NON-MEMBER:

      John Morgan

      CBOT RULE VIOLATION:

      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 trades or 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.

      FINDINGS:

      Pursuant to an offer of settlement in which John Morgan (“Morgan”) neither admitted nor denied the rule violation upon which the penalty is based, on October 3, 2018, a Panel of the Chicago Board of Trade Business Conduct Committee (“Panel”) found that on certain dates in August 2016, Morgan executed transactions in Rough Rice spread markets in accounts over which his employer maintained control and where there was common beneficial ownership on both sides of the transactions. Morgan executed the opposing buy and sell orders with the knowledge and intent that the orders would trade opposite one another. The purpose of these transactions was to roll the positions forward. The Panel concluded that Morgan thereby violated CBOT Rule 534.

      PENALTY:

      In accordance with the settlement offer, the Panel ordered Morgan to pay a fine of $10,000, and to have his access to all CME Group trading floors and direct and indirect access and to all electronic trading and clearing platforms owned or controlled by CME Group suspended for five business days, beginning on the effective date below and continuing through and including October 11, 2018.

      EFFECTIVE DATE:

      October 5, 2018