NOTICE OF DISCIPLINARY ACTION

MEMBER:

Hector Santos

CME RULE VIOLATIONS:

CME Rule 521. Requirements for Open Outcry Trades (in part)

In open outcry trading, bidding and offering practices must at all times be conducive to the competitive execution of transactions. All open outcry transactions, including spread and combination transactions, shall be made openly and competitively in the pit designated for the trading of the particular transaction. No bid or offer shall be specified for acceptance by a particular trader. Transactions may take place only at the best price available in the open outcry market at the time the trade occurs.

CME Rule 532. Disclosing Orders Prohibited

No person shall disclose another person's order to buy or sell except to a designated Exchange official or the CFTC, and no person shall solicit or induce another person to disclose order information. An order for pit execution is not considered public until it has been bid or offered by open outcry. No person shall take action or direct another to take action based on non-public order information, however acquired.

CME Rule 539. Pre-arranged, Pre-negotiated and Non-competitive Trades Prohibited

A. General Prohibition (in part): No person shall prearrange or pre-negotiate any purchase or sale or noncompetitively execute any transaction.

FINDINGS:

On May 5, 2022, the Chief Regulatory Officer of the CME Group’s Designated Contract Markets charged Hector Santos with violations of CME Rules 521, 532, and 539.A. based on allegations that on one or more occasions on February 11, 2020, and February 12, 2020, Santos and another trading desk broker and occasional broker in the S&P options pit, engaged in pre-arranged and directed trades in the FX options pit regarding the purchase or sale of March 2020 and April 2020 Japanese Yen Box spread trades. On both dates Santos and the other broker had numerous phone conversations with each other prior to the subject trades being executed in the FX options pit and disclosed non-public order information pertaining to Japanese Yen box spreads, including side of market, size of orders and price.

On August 30, 2022, a Hearing Panel Chair of the CME Business Conduct Committee (“BCC”) first determined that Santos, having failed to submit a written answer to the charges issued against him was deemed to have admitted the charges. Santos therefore waived his right to a hearing on the merits of the charges. Pursuant to CME Rule 408.F., a BCC Panel then found Santos guilty of committing the admitted charges and held a penalty hearing thereafter. 

PENALTY:

Based on the record and the Panel’s findings and conclusions, the Panel ordered Santos to pay a fine in the amount of $30,000, suspended his 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, and restricted Santos’s ability to have a business affiliation with, be employed by or have a financial or beneficial interest in a Member for a period of one year, beginning on the effective date and continuing for one year from the date that the ordered fine is paid.