NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CBOT 10-04622-BC

MEMBER:

Kyle McBain (KSM)

CBOT RULE VIOLATIONS:

Rule 432. General Offenses (in part)

It shall be an offense:

B. 2. to engage in conduct or proceedings inconsistent with just and equitable principles of trade;

Q. to commit an act which is detrimental to the interest or welfare of the Exchange or to engage in any conduct which tends to impair the dignity or good name of the Exchange;

T. to engage in dishonorable or uncommercial conduct;
…

FINDINGS:

Pursuant to an offer of settlement in which Kyle McBain neither admitted nor denied the rule violations upon which the penalty is based, on November 10, 2011, a Panel of the CBOT Business Conduct Committee found that on more than one occasion during 2010, McBain entered orders on the CME Globex® electronic trading platform during the pre-opening session that were not made in good faith for the purpose of executing bona fide transactions. Specifically, McBain entered, modified, and subsequently canceled orders in the Oat futures market with limit prices through the prevailing bid and/or offer in an attempt to identify the depth of the order book at different price levels. In attempting to discern market depth in this way, McBain caused the publicly displayed Indicative Opening Price (“IOP”) to fluctuate and reflect artificial prices. The panel found that in so doing McBain violated CBOT Rules 432.Q. and 432.T.

Additionally, the panel found that on January 12, 2010, McBain contacted the execution desk at his clearing firm while the pit and electronic markets were closed, and asked the desk to enter enough one-lot bids in the Oat futures market for his personal account at successively higher prices not for the purpose of trading, but in order to conceal a resting bid on the deferred-month contract from the viewable order book. The panel found that in so doing McBain violated CBOT Rule 432.B.2.

PENALTY:

In accordance with the settlement offer, the Panel fined McBain $70,000 and suspended his membership privileges, access to any CME Group trading floor, and direct and indirect access to any CME Group electronic trading or clearing platform for 10 business days, beginning on the effective date below and continuing through and including November 28, 2011.

EFFECTIVE DATE:

November 14, 2011