NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CME 10-07049-BC

MEMBER:

CHRISTOPHER K. O’MALLEY (CKO)

CME RULE VIOLATIONS:

Rule 432. General Offenses

It shall be an offense:

B. to engage in fraud, bad faith or in conduct or proceedings inconsistent with just and equitable principles of trade;

Rule 531. Trading Against Customers’ Orders Prohibited

A. General Prohibitions

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

Rule 539. Prearranged, Pre-Negotiated and Noncompetitive Trades Prohibited

A. General Prohibition

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

FINDINGS:

Pursuant to an offer of settlement in which Christopher O’Malley neither admitted nor denied the rule violations upon which the penalty is based, on December 17, 2010, a Panel of the CME Business Conduct Committee found that on five occasions between April 9 and April 19, 2010, O’Malley directly traded opposite his customers’ orders. On four of those occasions, after receiving the orders, reviewing the orders’ instructions, calling in a price to the market reporter, and handing the orders off to other brokers, O’Malley would trade opposite those orders for his personal account. On one occasion, O’Malley fraudulently endorsed one of his customer’s orders as having been executed by another broker opposite O’Malley’s personal account when in fact that order was never competitively executed by open outcry.

The Panel further found that on thirteen occasions between January 2008 and April 2010, O’Malley assigned profitable outtrades from customer orders to his error account or personal trading account after the trades did not clear, which in effect, allowed O’Malley to take the opposite side of his customers’ orders.

The Panel found that in so doing O’Malley violated CME Rule 432.B., Rule 531.A., and Rule 539.A.

PENALTY:

In accordance with the settlement offer, the Panel fined O’Malley $30,000, which includes $16,450 in disgorged profits, and suspended his membership privileges, access to any CME Group trading floor, and direct access to any CME Group electronic trading or clearing platform for one year, beginning on the effective date below and continuing through and including December 20, 2011.

EFFECTIVE DATE:

December 21, 2010