CME RULE VIOLATIONS:
CME Rule 432: General Offenses (in part)
It shall be an offense:
B. 1. to engage in fraud or bad faith;
C. to engage in dishonest 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;
Pursuant to an offer of settlement in which Nathan Harris neither admitted nor denied the rule violations upon which the penalty is based, on August 13, 2019, a Panel of the CME Business Conduct Committee (“Panel”) found that on numerous occasions between January 2014 and August 2014, Harris, while employed as a broker at a trading firm, transmitted customer orders to the Exchange that had not been authorized. Specifically, despite the absence of an executed power of attorney or similar document, Harris entered orders to buy and sell Live Cattle futures contracts for multiple customer accounts without the account owners’ knowledge, permission or authority to do so. Though in some cases he received verbal authority to trade with discretion in small quantities, Harris placed orders on the Exchange and established positions in customers’ accounts that far exceeded their risk parameters, sometimes even exceeding customers’ financial ability. As a result of his unauthorized trading, Harris caused more than $10 million in losses for the customers’ accounts, which his firm and its principals subsequently repaid to affected customers in accordance with settlements previously reached in their own disciplinary actions. Harris also told a customer how he should respond to questions if he was contacted by Market Regulation or the CFTC, and that the customer should claim that he, and not Harris, was directing all of the trading in his account.
The Panel concluded that Harris thereby violated CME Rules 432.B.1., 432.C and 432.U.
In accordance with the settlement offer, the Panel ordered Harris to pay to the Exchange a fine of $1,250,000. The Panel also barred Harris from access to any trading floor owned or controlled by CME Group and from direct and indirect access to any designated contract market, derivatives clearing organization or swap execution facility owned or controlled by CME Group for 18 months, beginning on the effective date below and continuing through and including March 9, 2021. Further, the Panel permanently barred Harris from: (1) trading on a discretionary basis for or on behalf of any person or entity, whether by power of attorney or otherwise; and (2) entering customer orders in a brokerage capacity at any CME Group Inc. Exchange. Both of these permanent prohibitions exclude trading on behalf of himself, an entity exclusively owned by Harris, or an entity exclusively owned by Harris and his immediate family.
September 9, 2019