NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CBOT 09-03229-BC

MEMBER:

Jeffrey Cozzolino (COZ)

CBOT RULE VIOLATIONS:

Rule 530. Priority of Customers’ Orders (in part)
A member shall not buy (sell) a futures contract, buy (sell) a call option or sell (buy) a put option for his own account, an account in which he has a direct or indirect financial interest, or an account over which he has discretionary trading authority when he is in possession of an executable order for another person to buy (sell) a futures contract, buy (sell) a call option or sell (buy) a put option in the same product, regardless of the venue of execution. All contract months in a given futures product and all options on the futures product, in addition to any corresponding alternative sized (mini or micro) futures or options contracts on a given product, shall be considered the same product for the purposes of this rule.

FINDINGS:

On July 26, 2011, in accordance with Chicago Board of Trade (“CBOT”) Rule 407.C., a Business Conduct Committee (“BCC”) Hearing Panel Chair granted the Market Regulation Department’s request to have a single charge issued against Jeffrey Cozzolino by a panel of the CBOT Probable Cause Committee deemed admitted. Through this, Cozzolino was deemed to have admitted that he traded ahead of an executable customer order in his possession and therefore violated CBOT Rule 530 on October 31, 2008, when he over-filled a customer order by 65 Dow Jones Industrial Average Index futures contracts and assigned into his personal account 65 contracts executed at an earlier and better price than the futures allocated to the customer’s order. After assigning the earlier executed and better priced fills to his personal account, Cozzolino offset the 65 contracts for a personal profit of $4,425. Also, in allocating the customer the worse fill prices, the customer was disadvantaged by $9,750. Cozzolino also deemed to have waived his right to a hearing on the merits of this matter because of his admission.

On September 1, 2011, given Cozzolino’s default admission to the charge and waiver of his right to a hearing on the merits, a Panel of the CBOT BCC (“Panel”) found Cozzolino guilty of having committed a violation of CBOT Rule 530 as charged. With respect to the penalty to be imposed for this violation, the BCC Panel considered oral arguments presented by Cozzolino and Market Regulation, along with Market Regulation’s written recommendations, information regarding sanctions issued in prior cases, and Cozzolino’s statements to the Panel. The Panel further took into consideration that: (1) Cozzolino’s actions resulted in harm to a customer; (2) Cozzolino had offered an adjustment of $9,750 to the customer, but ultimately did not make restitution to the customer; and (3) Cozzolino had been a Member for a period of years and should have been aware of the importance of complying with Rule 530.

PENALTY:

Based on the record and the Panel’s findings and conclusions, the Panel ordered Cozzolino to pay a fine in the amount of $25,000 (which includes disgorgement in the amount of $4,425), ordered Cozzolino to pay restitution in the amount of $9,750, and barred Cozzolino for a period of three years from: (1) applying for membership in any Exchange owned, controlled, or operated by CME Group Inc.; (2) affiliating with any Member (as that term is defined in CBOT Rule 400) of any such Exchange in connection with business conducted on or subject to Exchange rules; (3) and directly or indirectly accessing any trading or clearing platform that is owned, controlled or operated by CME Group Inc., including but not limited to CME Globex.

EFFECTIVE DATE:

October 10, 2011