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 Christopher Kenny (“Kenny”) presented at a hearing on October 30, 2018, in which Kenny 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 10, 2017 through June 15, 2017, there were multiple instances during which Kenny had pre-execution communications prior to the execution of a trade. Specifically, Kenny was informed whether his prospective counter-parties intended to buy or sell. The Panel further found that after having received such information, Kenny 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 Kenny violated Exchange Rule 539.C.3.d.
In accordance with the settlement offer, the Panel ordered Kenny to pay a fine to the Exchange in the amount of $10,000 and suspended Kenny from all membership privileges and direct or indirect access to any CME Group trading floor or CME Group electronic trading or clearing platform, including Globex, for 5 business days, beginning on the effective date below. The suspension will run from November 1, 2018 through November 7, 2018.