NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CME 09-06442-BC

MEMBER FIRM:

GELBER GROUP LLC

CME RULE VIOLATION:

Rule 432. GENERAL OFFENSES

It shall be an offense:

T. to engage in….uncommercial conduct.

W. for a Member to fail to diligently supervise its employees and agents in the conduct of their business related to the Exchange.

FINDINGS:

Pursuant to an offer of settlement in which Gelber Group LLC neither admitted nor denied the rule violations upon which the penalty is based, on November 15, 2011, a Panel of the CME Business Conduct Committee found that between January 11, 2010, and February 16, 2010, a Gelber proprietary trader entered E-mini Nasdaq 100 futures orders on CME Globex during the pre-opening state from which an Indicative Opening Price (“IOP”) is calculated that were not entered in good faith for the purpose of executing bona fide transactions once the market opened. [1] In a pattern of instances spanning several trade dates during this time period, orders were entered and eventually cancelled immediately prior to the lockdown period. As a result, this activity caused fluctuation in the publicly displayed pre-opening equilibrium price which otherwise would not have occurred.

Gelber did not adequately supervise its trader to prevent the non-bona fide order entry and order cancellation in the pre-opening state.

The Panel found that in so doing, Gelber violated CME Rules 432.T. and 432.W.

 

PENALTY:

In accordance with the settlement offer and in consideration of other factors, including the cooperation provided to Exchange staff by Gelber, the Panel fined Gelber $75,000.

EFFECTIVE DATE:

November 17, 2011
 

[1] Legacy Market Regulation Advisory Notice # RA1001-5 (“Improper Conduct with Respect to Pre-Opening Orders Entered on CME Globex”) (dated January 11, 2010) provided, in relevant part, that “[A]ll orders entered on Globex during the pre-opening are expected to be entered in good faith for the purpose of executing bona fide transactions.” Legacy Market Regulation Advisory Notice # RA1001-5 has been superseded by Market Regulation Advisory Notice # RA1103-5 (dated September 20, 2011).