NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CBOT 07-TOO-023-BC

MEMBER:

John Zanutto (BBQ)

LEGACY CBOT RULE VIOLATION:

527. OUTTRADES, ERRORS, AND MISHANDLING OF ORDERS

A. Outtrades

If a floor broker discovers, either intraday or interday, that all or some portion of a customer order was executed but cannot be cleared, the broker shall do one of the following:

1. Re-execute the order in the market and adjust the customer by check if the re-execution price is worse than the original execution price. If the re-execution price is better than the original execution price, the customer is entitled to the better price.

2. Assign the opposite side of the portion that cannot be cleared to his or her error account and assign a fill to the customer at the execution price. The floor broker shall not liquidate the assigned position until at least 10 minutes have elapsed after the execution of the order giving rise to the outtrade and, in any event, after the bracket period in which the outtrade arose has ended. The liquidation restrictions shall not apply to a liquidation during a post close session. Any profits resulting from the liquidation of the assigned position belong to the floor broker, and may be retained or disbursed to whomever he chooses, in his discretion.

B. Unfilled or Underfilled Orders

If a broker fails to execute an order or underbuys or undersells for an order, the broker shall do one of the following:

a. Execute the order or the remainder of the order in the market and adjust the customer by check if the customer is filled at a price less favorable than that to which he was entitled but for the error or mishandling. If the order is filled at a more favorable price, the customer is entitled to the better price.

b. Execute the order or the remainder of the order in the market. If the order, or the remainder of the order, is filled at a worse price than that to which it was entitled but for the error or mishandling, the broker may allocate the fill to his error account and assign the opposite side of the order to his error account at the price to which the customer was entitled. If the order is filled at a more favorable price, the customer is entitled to the better price.

432. GENERAL OFFENSES

It shall be an offense:

B. To engage in fraud, bad faith, or in conduct or proceedings inconsistent with just and equitable principles of trade.

FINDINGS:

Pursuant to an offer of settlement in which John Zanutto neither admitted nor denied the rule violations upon which the penalty is based, on October 6, 2011, a panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee found that on March 7, 2008, Zanutto improperly created an outtrade by endorsing one of his customer’s orders into a member with whom he did not trade. Zanutto subsequently improperly assigned the opposite side of that customer’s order into his error account for the purpose of obtaining a position opposite that order. The prohibited activity enabled Zanutto to realize a profit of $13,975.

The Panel further found that on January 14, 2008, Zanutto failed to wait the required 10 minutes and a change of bracket prior to liquidating an assigned position. The Panel found that in so doing, Zanutto violated CBOT Rules 432.B. and 527.

PENALTY:

In accordance with the settlement offer, the Panel fined Zanutto $15,000, ordered Zanutto to pay disgorgement in the amount of $13,975. The Panel also suspended Zanutto’s direct access to any CME Group trading or clearing platform for eighteen months beginning on the effective date below. In addition, the Panel barred Zanutto from applying for any CME Group Exchange membership for eighteen months. Zanutto’s suspension will run from the October 10, 2011 through April 10, 2013, inclusive.

EFFECTIVE DATE:

October 10, 2011