• NOTICE OF DISCIPLINARY ACTION

      • #
      • CBOT-15-0115-BC
      • Effective Date
      • 22 November 2019
    • FILE NO.:

      CBOT 15-0115-BC

      NON-MEMBER:

      Christopher C. Wielgus

      CBOT RULE VIOLATIONS:

      (LEGACY) Rule 526 Block Trades (in part)

      The Exchange shall designate the products in which block trades shall be permitted and determine the minimum quantity thresholds for such transactions.

      CBOT Market Regulation Advisory Notice RA 1314-3 (in relevant part)

      10. Use of Nonpublic Information Regarding Block Trades (in part)

      Pre-hedging or anticipatory hedging of any portion of a block trade in the same product or a closely-related product based upon a solicitation to participate in a block trade is not permitted. A closely related product is a product that is highly correlated to, serves as a substitute for, or is the functional economic equivalent of the product being traded as a block.

      Counterparties to a block trade are permitted to initiate trades to hedge or offset the risk associated with the block trade following the consummation of the block trade, including during the period preceding the public report of the block trade by the Exchange.

      Except as provided above, parties privy to nonpublic information attendant to a block trade are prohibited from trading in the same product or a closely-related product for the purpose of taking advantage of such information prior to the public report of the block trade by the Exchange. This prohibition is not intended to preclude such parties from continuing to transact in the marketplace in the context of their normal business; rather, it precludes parties in possession of actionable nonpublic information regarding an imminent block trade or report of a block trade from specifically using such information to their advantage. Information regarding a block trade is considered to be nonpublic until such time that the block trade details have been disseminated to the marketplace by the Exchange or the information can otherwise be demonstrated to have become stale or obsolete.

      FINDINGS:

      Pursuant to an offer of settlement in which Christopher Wielgus (“Wielgus”) neither admitted nor denied the rule violations upon which the penalty is based, on November 20, 2019, a Panel of the Chicago Board of Trade Business Conduct Committee (“Panel”) found that on multiple occasions between January 2014 and July 2015, while employed as a trader for a firm, Wielgus, after receiving the solicitation of a block trade but prior to consummating the block trade with the customer, either executed a separate block trade with a liquidity provider or executed a trade on CME Globex in the same product and on the same side of the market as the customer’s proposed block trade in order to hedge the block trade ultimately executed opposite the customer. By entering into the hedge
      transaction and establishing the price of the hedge transaction prior to consummating the customer block trade, Wielgus was able to guarantee his employer a profit on the subsequent execution opposite the customer.

      The Panel further found that in some of these instances, Wielgus established a standardized language with third-party liquidity providers via telephone and instant message communications in order to avoid the appearance in the audit trail records that he pre-hedged customer orders.

      The Panel concluded that as a result of the foregoing, Wielgus violated (Legacy) CBOT Rule 526.

      PENALTY:

      In accordance with the settlement offer, the Panel ordered Wielgus to pay a fine in the amount of $20,000 ($10,000 of which is allocated to NYMEX), and suspended Wielgus 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 three months. The suspension shall run from November 22, 2019, through February 22, 2020, inclusively.

      EFFECTIVE DATE:

      November 22, 2019