NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CME 11-8395-BC
 

MEMBER:

Equitec Proprietary Markets, LLC

CME RULE VIOLATION:

Rule 432. General Offenses

It shall be an offense:

Q. 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 Equitec Proprietary Markets, LLC neither admitted nor denied the rule violation upon which the penalty is based, on December 19, 2012, a Panel of the CME Business Conduct Committee (“Panel”) found that between April 1 and June 30, 2011, mass quotes entered by a trader using Equitec’s software incrementally widened spreads between the bid and ask prices in the E-Mini S&P options, resulting in the dissemination of distorted prices to the marketplace. No errant orders were executed as a result of these quotes. This aberrant quoting was the result of a flaw in Equitec’s SMILE software that Equitec failed to recognize until this particular scenario occurred.

Further, in attempting to correct the issue, Equitec created a patch that was not fully effective and required the creation of a second patch. This activity resulted in aberrant prices again, being repetitively and publicly disseminated. No errant orders were executed as a result of these quotes.

PENALTY:

In accordance with the settlement offer the Panel ordered Equitec Proprietary Markets, LLC to pay a fine of $20,000.

EFFECTIVE DATE:

December 21, 2012