• NOTICE OF DISCIPLINARY ACTION

      • #
      • NYMEX 19-1201-BC
      • Effective Date
      • 03 May 2021
    • NON-MEMBER:

      Kevin Howard

      NYMEX RULE VIOLATION: NYMEX RULE 575.D. DISRUPTIVE PRACTICES PROHIBITED

      No person shall enter or cause to be entered an actionable or non-actionable message with intent to disrupt, or with reckless disregard for the adverse impact on, the orderly conduct of trading or the fair execution of transactions.

      MARKET REGULATION ADVISORY NOTICE DISRUPTIVE PRACTICES PROHIBITED RULE 575 RA1904-5 (IN PART):

      Q22: Is the creation or execution of User Defined Spreads (“UDS”) for the purposes of deceiving or disadvantaging other market participants a violation of Rule 575?

      A22: Yes. Although the CME Globex system provides certain protections such as reasonability checks with respect to option deltas and the futures price on covered instruments, the UDS functionality requires users to exercise diligence and care in the creation of option spread instruments, including the creation of covered option strategies. Market participants are reminded that knowingly creating and/or trading UDS instruments in a manner intended to deceive or unfairly disadvantage other market participants is considered a violation of Rule 575.

      FINDINGS:

      Pursuant to an offer of settlement that Kevin Howard (“Howard”) presented at a hearing on April 29, 2021, in which Howard neither admitted nor denied the rule violation upon which the penalty is based, a Panel of the NYMEX Business Conduct Committee (“Panel”) found that on multiple occasions during 2019, Howard created and executed trades in covered User Defined Spread (“UDS”) in various Crude Oil Options on Futures contracts on the Globex electronic trading platform for the purpose of receiving advantageous over-allocations or under-allocations of futures contracts that should have been associated with the covered options instrument.

      The Panel concluded that this activity violated Exchange Rule 575.D.

      PENALTY:

      In accordance with the settlement offer, the Panel ordered Howard to pay a fine to the Exchange in the amount of $50,000 and serve a five business day trading suspension 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. The suspension shall run from May 3, 2021 through, and including, May 7, 2021.