Notice to Members
Notice No. 52 01/27/2006
Compliance Reminder Regarding Recordation of Trades Executed for a Customer of Another Member
When a broker ("the absent broker") gives his customer or personal orders to another broker for execution ("the executing broker") and leaves the ring for any period of time, the executing broker who remains in the ring to execute the orders on behalf of the absent broker must record the transactions on his trading cards. It is a violation of both NYMEX and COMEX trading rules for the executing broker to instruct the members who trade opposite him to record the absent broker on their trading cards as if he had been the opposite party to the trade. It is also a violation for the executing broker to forgo recording the trades and for the absent broker (or his clerk) to instead record the trades as if he had been in the ring. This practice, sometimes referred to as "Broker-Up Trading," is a violation of trade recordation rules - NYMEX Division Rule 6.90 and COMEX Division Rule 104.80 - as well as Conduct Detrimental to Exchange under Exchange Rule 8.55(B)(1). In a "broker-up" scenario, the executing broker typically would have no record of the transactions on his trading cards, while the trading cards of the absent broker and the brokers trading opposite the orders would inaccurately indicate that the absent broker had executed the trades. The lack of accountability may enable the executing broker to trade ahead of or opposite the absent broker's orders, because the record of the trade inaccurately reflects the actual broker for the trade. Members are reminded that it is permissible to execute another broker's orders as a temporary affiliate without registering as a full broker association with the Exchange. NYMEX Division Rule 6.41(E)(7) and COMEX Division Rule 104.24(e) permit temporary affiliations as long as the member executing orders for another member delineates the period of time during which he is assisting the floor member by drawing a line on his trading card at the point in time he begins to perform services for the other member and the point in time he ends handling the floor member's customer orders. After the temporary affiliation ends, the absent broker and the executing broker may execute trades opposite each other, provided however, that the executing broker shall not use or disclose to any other person information regarding the absent broker's customer orders obtained in connection with or as a result of a temporary affiliation with the absent broker.
Should you have any questions or require any further information, please contact exchangeinfo@nymex.com