NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CME 08-03925-BC

MEMBER:

FRANK FERRO

CME RULE VIOLATIONS:

Rule 531.A. Trading Against Orders Prohibited – General Prohibition

No person in possession of a customer order shall knowingly take, directly or indirectly, the opposite side of such order for his personal account, an account in which he has a direct or indirect financial interest, or an account over which he has discretionary trading authority.

Rule 532. Disclosing Orders Prohibited

No person shall disclose another person’s order to buy or sell except to a designated Exchange official or the CFTC, and no person shall solicit or induce another person to disclose order information. An order for pit execution is not considered public until it has been bid or offered by open outcry. No person shall take action or direct another to take action based on non-public order information, however acquired. The mere statement of opinions or indications of the price at which a market may open or resume trading does not constitute a violation of this rule.

FINDINGS:

Pursuant to an offer of settlement in which Frank Ferro neither admitted nor denied the rule violations upon which the penalty is based, on June 15, 2011, a Panel of the CME Business Conduct Committee found that on numerous occasions between March 1 and October 31, 2008, while acting as a broker in the Australian Dollar and Canadian Dollar futures pits, Ferro executed customer orders in the pit and then shortly thereafter sold or bought back for his personal account a smaller quantity of the same product with the same expiration month at the same price as the customer order opposite the same local trader with whom he had just executed all or a portion of the customer order opposite thereby allowing Ferro to indirectly take the opposite side of the customer order. The Panel concluded that in so doing, Ferro violated CME Rule 531.

The Panel further found that on two occasions between June 26, 2008, and July 10, 2008, prior to the 7:20 a.m. opening of the market, Ferro entered orders into the CME Globex electronic trading platform for his personal account based on non-public order information in his possession. The Panel concluded that in so doing, Ferro violated CME Rule 532.

 

PENALTY:

In accordance with the settlement offer, the Panel ordered Ferro to pay a fine of $12,000, which includes disgorgement of profits Ferro realized. The Panel suspended Ferro’s membership privileges, access to any CME Group trading floor, and direct access to any CME Group electronic trading or clearing platform for 25 business days beginning on the effective date below and continuing through and including July 22, 2011. The Panel further barred Ferro from filling customer orders for 50 business days, beginning on the effective date below and continuing through and including August 26, 2011.

EFFECTIVE DATE:

June 17, 2011