NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CBOT 09-03996-BC

NON-MEMBER:

MICHAEL CARDWELL
 

CBOT RULE VIOLATIONS:

Legacy RULE 534 WASH SALES PROHIBITED

No person shall place for the same beneficial owner buy and sell orders for the same product and expiration month, and, for a put or call option, the same strike price, at or about the same time with the intent to avoid a bona fide market position exposed to market risk (transactions commonly known or referred to as wash sales). Buy and sell orders placed for the same beneficial owner in the same product and expiration month, and, for a put or call option, the same strike price, must be entered in good faith for the purpose of executing bona fide transactions that result in a change of ownership. Additionally, no person shall accept, execute or accommodate the execution of orders which are prohibited by this rule with knowledge of their character.

RULE 539.A PREARRANGED, PRE-NEGOTIATED AND NONCOMPETITIVE TRADES PROHIBITED (in part)

A. General Prohibition

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

RULE 576 IDENTIFICATION OF GLOBEX TERMINAL OPERATORS

Each Globex terminal operator shall be identified to the Exchange, in the manner prescribed by the Exchange, and shall be subject to Exchange rules. If user IDs are required to be registered with the Exchange, it is the duty of the clearing member to ensure that registration is current and accurate at all times. Each individual must use a unique user ID to access Globex. In no event may a person enter an order or permit the entry of an order by an individual using a user ID other than the individual’s own unique user ID.

FINDINGS:

Pursuant to an offer of settlement in which Michael Cardwell neither admitted nor denied the rule violations upon which the penalty is based, on March 14, 2013, a Panel of the CBOT Business Conduct Committee found that between May 2009 and June 2009, Cardwell entered buy and sell orders for three (3) accounts owned by a member on the CME Globex® electronic trading platform using a Tag50 User ID registered to that member. Through these buy and sell orders, Cardwell executed numerous wash transactions and round turn money pass transactions for the benefit of the member’s accounts. The round turn money pass transactions had the effect of transferring $2,000 between the member’s accounts. The Panel concluded that in so doing, Cardwell violated CBOT legacy Rule 534, CBOT Rule 539.A, and CBOT Rule 576.

 

PENALTY:

In accordance with the settlement offer, the Panel ordered Cardwell to pay a fine of $5,000. The Panel also barred Cardwell for a period beginning on the effective date and lasting nine months from applying for membership privileges on any CME Group Inc. exchange, accessing all CME Group Inc. trading floors, and indirect and direct access to all electronic trading and clearing platforms owned or controlled by CME Group Inc.

EFFECTIVE DATE:

March 18, 2013