EXCHANGE RULE 539.C. PRE-EXECUTION COMMUNICATIONS REGARDING GLOBEX TRADES (in part)
Parties may engage in pre-execution communications with regard to transactions executed on the Globex platform where one party (the first party) wishes to be assured that a contra party (the second party) will take the opposite side of the order under the following circumstances:
3. Permissible Entry Methods for Orders
d. RFQ + RFC Cross (“R-CROSS”)
Following the pre-execution communication, a Request for Quote (“RFQ”) for the particular option or option spread or combination must be entered into Globex. Thereafter, the RFC order must be entered no less than fifteen (15) seconds and no more than thirty (30) seconds after the entry of the RFQ in order to proceed with the trade. The RFQ and the RFC order must be entered within the same trading session. Failure to enter the RFC order within 30 seconds after the entry of the RGQ will require a new RFQ to be entered prior to the entry of the RFC order, which must be entered in accordance with the time parameters described above in order to proceed with the trade.
Pursuant to an offer of settlement that Michael Caponiti (“Caponiti”) presented at a hearing on October 30, 2018, in which Caponiti neither admitted nor denied the findings or rule violation upon which the penalty is based, a Panel of the NYMEX Business Conduct Committee (“Panel”) found that from February 14, 2017 through June 20, 2017, there were multiple instances during which Caponiti had pre-execution communications prior to the execution of a trade. Specifically, Caponiti was informed whether his prospective counter-parties intended to buy or sell. The Panel further found that after having received such information, Caponiti did not ensure that the requisite Request for Quote and Request for Cross were submitted to Globex before the execution of the trades.
The Panel concluded that Caponiti violated Exchange Rule 539.C.3.d.
In accordance with the settlement offer, the Panel ordered Caponiti to pay a fine to the Exchange in the amount of $25,000.