NOTICE OF DISCIPLINARY ACTION

NON-MEMBER:

Charlie Cai

COMEX RULE:

Rule 539. Prearranged, Pre-Negotiated and Noncompetitive Trades Prohibited (In Part)

539.A. General Prohibition

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

FINDINGS:

Following an evidentiary hearing on the merits that commenced on November 8, 2023, a Panel of the COMEX Business Conduct Committee (“Panel”) issued a written decision that found on September 9, 2020, Cai noncompetitively executed multiple transactions in the AUG21-OCT21 Gold futures spread market. Specifically, Cai pre-arranged the execution of trades between his trading account and his wife’s trading account in which the buy orders and sell orders were on opposite sides of the same trades in the Gold futures contracts, had matching prices and quantities, and traded in under five seconds of order entry.

Prior to these trades, Cai’s and his wife’s accounts were both subject to margin calls at their clearing firm. Cai admitted during his interview with Market Regulation that the purpose of these trades was to close positions in each account in response to the margin calls. While Cai denied during his interview that the orders were entered to purposely match, he stated that he and his wife executed these trades while he was in the same room with his wife, that they were on separate computers, and that they would talk. Following these trades on September 9, 2020, the open positions and margin deficits in both accounts were reduced, and the clearing firm lifted the liquidation-only restriction on the accounts the following day.

Accordingly, the Panel found Cai guilty of violating COMEX Rule 539.A.

PENALTY:

Based upon the record and the Panel’s findings and conclusions, the Panel ordered Cai to pay a $60,000 fine and serve a one-year suspension from: (1) applying for membership at any CME Group exchange; (2) direct and indirect access and use of any trading floor, electronic trading platform, or clearing platform owned or controlled by CME Group; and (3) affiliation with, employment by, or association with a Member (as this term is defined in Rule 400) or affiliate of a Member of any CME Group exchange. The suspension shall begin on January 29, 2024 and continue for one year from the date that payment of the fine is received in full.