NOTICE OF DISCIPLINARY ACTION

MEMBER:

Stephen Frederick Lake

CBOT RULE VIOLATIONS:

Rule 432. General Offenses

It shall be an offense:

B.1. to engage in fraud or bad faith;

L.1. to fail to appear before the Board, Exchange staff or any investigative or hearing committee at a duly convened hearing, scheduled staff interview or in connection with any investigation; and

T. to engage in dishonorable or uncommercial conduct.

FINDINGS:

On February 4, 2016, a Panel of the Chicago Board of Trade (“CBOT”) Probable Cause Committee (“PCC”) charged member Stephen Frederick Lake (“Lake”) with violating CBOT Rules 432.B.1. and T. based on allegations that on March 12, 2015, Lake, a trader in the Live Cattle options on futures pit, placed an order to buy 1,000 contracts of the June 2015 Ten-Year Note 100 Puts (“Jun15 Ten-Year”) at a Cabinet Price of $3.00. Between March 12, 2015, and March 25, 2015, Lake changed the quantity of the order to 3,000 contracts and modified the price from Cabinet prices of Cab$3 to Cab$4, and finally to Cab$5 for the purpose of artificially and temporarily inflating the value of his account.

The Panel also charged Lake with a violating CBOT Rule 432.L.1. based on allegations that Lake failed to appear before Exchange staff for two scheduled interviews, specifically, on July 8, 2015, and October 9, 2015.

On May 2, 2016, and in accordance with CBOT Rule 407.C., a Hearing Panel Chair of the CBOT Business Conduct Committee (“BCC”) found that Lake failed to answer the charges issued against him by the CBOT PCC. The Hearing Panel Chair accordingly ruled that in failing to answer the charges issued Lake was deemed to have admitted the charges, and through this admission Lake had waived his right to a hearing on the merits of the charges.

On July 12, 2016, a Panel of the CBOT BCC found that Lake committed the violations contained in the admitted charges, and subsequently held a penalty hearing.

PENALTY:

Based on the record and the Panel’s findings and conclusions, the Panel ordered Lake to pay a fine in the amount of $50,000, and barred him for a period of five years from (1) applying for membership at any CME Group exchange; and (2) direct or indirect access and use of any trading floor, electronic trading platform or clearing platform owned or operated by any CME Group exchange.

EFFECTIVE DATE:

August 16, 2016