NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CME 10-07126-BC

NON-MEMBER:

Amarillo Brokerage Company

CME RULE VIOLATION:

534. WASH TRADES PROHIBITED

No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means.

432.Q. GENERAL OFFENSES

It shall be an offense 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.

FINDINGS:

Pursuant to an offer of settlement in which Amarillo Brokerage Company (“Amarillo”) neither admitted nor denied any rule violations upon which the penalty is based, on December 20, 2011, a panel of the CME Business Conduct Committee found that on numerous dates between December 2008 and June 2010, two employees of Amarillo executed 541 transactions totaling 3,750 contracts in the expiring Live Cattle futures contracts where there was common beneficial ownership on both sides of the transactions. The opposing buy and sell orders were placed with the knowledge and intent that the orders would match opposite one another, and Amarillo’s purpose in doing so was to freshen long futures position dates prior to the commencement of the respective delivery months. The Panel found that, in committing these actions, Amarillo violated CME Rules 534 and 432.Q.

The Panel recognized that Amarillo executed these transactions opposite one another based on a misunderstanding of Exchange rules, and that, although no violations of CME Rule 533 (Simultaneous Buy and Sell Orders for Different Beneficial Owners) were alleged, in all but 6 transactions, Amarillo exposed its initial order to the marketplace for at least 5 seconds prior to entering an order on the opposite side of the market.

PENALTY:

In accordance with the offer of settlement, the Panel fined Amarillo Brokerage Company $75,000.

EFFECTIVE DATE:

December 30, 2011