NOTICE OF DISCIPLINARY ACTION

NON-MEMBER:           

David Zubrod

CME RULE VIOLATIONS:             

Rule 432          General Offenses (in part)

It shall be an offense:

L.2.  to fail to fully answer all questions or produce all books and records at such hearing or in connection with any investigation, or to make false statements.

Rule 534          Wash Trades Prohibited

No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash trades or wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means.

Rule 539          Prearranged, Pre-Negotiated and Noncompetitive Trades Prohibited (in part)

A.     No person shall prearrange or pre-negotiate any purchase or sale or noncompetitively execute any transaction….

FINDINGS:                    

Pursuant to an offer of settlement in which David Zubrod neither admitted nor denied the rule violation or factual findings upon which the penalty is based, on February 22, 2022, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel”) found that between June 28, 2019, and October 14, 2019, Zubrod entered several buy and sell orders in the October 2019, December 2019, and January 2020 Class III Milk futures contracts for an account he owned that traded opposite each other. Zubrod knew or reasonably should have known that the purpose of the orders was to avoid taking a bona fide position exposed to market risk.

In addition, the Panel found that between September 13, 2019, and January 17, 2020, Zubrod non-competitively executed trades in several Class III Milk futures and options contracts for his account opposite another account over which he was authorized to trade. Zubrod directed his broker to enter the opposing orders for the accounts at the same price and for equal or greater quantity in markets with extremely low liquidity to ensure a match would result.

Further, the Panel found that Zubrod made false statements to Exchange staff during his interview in connection with the investigation. The Panel thereby concluded that Zubrod violated CME Rules 432.L.2., 534, and 539.A.

PENALTY:                   

In accordance with the settlement offer, the Panel ordered Zubrod to pay a fine of $35,000. The Panel also suspended Zubrod 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 30 business days, beginning on the effective date below and continuing through and including April 6, 2022.

EFFECTIVE DATE:                         

February 24, 2022