NOTICE OF DISCIPLINARY ACTION

MEMBER:

GEORGE MACK, JR.

CME RULE VIOLATIONS:

Rule 432 (“General Offenses”) (in part)

It shall be an offense:

B.2. to engage in conduct or proceedings inconsistent with just and equitable principles of trade;

. . .

L.1. to fail to appear before the Board, Exchange staff or any investigative or hearing committee at a duly convened hearing, scheduled staff interview or in connection with any investigation;

Rule 530 Priority of Customers’ Orders

A member shall not buy (sell) a futures contract, buy (sell) a call option or sell (buy) a put option for his own account, an account in which he has a direct or indirect financial interest, or an account over which he has discretionary trading authority when he is in possession of an executable order for another person to buy (sell) a futures contract, buy (sell) a call option or sell (buy) a put option in the same product, regardless of the venue of execution. All contract months in a given futures product and all options on the futures product, in addition to any corresponding alternative sized (mini or micro) futures or options contracts on a given product, shall be considered the same product for the purposes of this rule.

Rule 531 Trading Against Customers’ Orders Prohibited

A. General Prohibition

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 indirect financial interest, or an account over which he has discretionary trading authority.

Rule 532 Disclosing Orders Prohibited

With the exception of transactions executed in accordance with the requirements of Rules 526, 538, 539 and 549, 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:

On September 16, 2015, an evidentiary hearing was held before a Panel of the CME Business Conduct Committee (“Panel”) on the charges issued by the CME Probable Cause Committee that George Mack, Jr. (“Mack”), violated CME Rules 432.B.2, 432.L.1, 530, 531 and 532. Mack, a CME member for almost 27 years and a dual trader in the Live Cattle futures pit, disputed all charges.

The hearing focused on Mack’s trading conduct on ten occasions in between July 2011 and September 2012 that followed a similar pattern. Specifically, the Panel found that in all but one of the ten instances, Mack received a large market on close customer order. With knowledge of the likely impact of that order during the close, Mack used Globex to establish his own position on the same side of the market as the customer order prior to the close. During the close, he liquidated his personal position by indirectly taking the opposite side of his customer order, realizing a profit for his personal account in doing so. The Panel also found that the one remaining instance did not involve a market on close order but otherwise followed the same pattern, except that Mack traded for his own account while in possession of an executable customer order. The Panel rejected Mack’s arguments that he did not have executable orders in hand and that the fact that he was allowed to trade his personal account as a dual trader meant he did not violate Exchange rules. Specifically, the Panel also found no credible explanation as to why he made the personal trades at issue if he was not acting on nonpublic order information, or why he made the personal trades in the one instance when he was in possession of an executable customer order. Finally, the Panel found that Mack could not deny that he had indirectly taken the opposite side of his customers’ orders. The Panel thus concluded that Mack violated CME Rules 530, 531, 532 and 432.B.2.

The Panel also found that Mack violated CME Rule 432.L.1 for failing to appear before Exchange staff for a scheduled interview. Specifically, on September 30, 2013, Mack failed to appear for his scheduled interview. Though the Panel considered that Mack met with Exchange staff on other subsequent occasions, the Panel found that Market Regulation made repeated efforts to conduct an investigative interview of Mack, and that Mack was aware of those requests but chose not to cooperate.

PENALTY:

Based on the record and the Panel’s findings and conclusions, the Panel ordered Mack to: (1) pay a fine in the amount of $35,000; (2) disgorge profits in the amount of $5,850; and (3) serve a fifteen month suspension of access to any CME Group trading floor and of direct and indirect access to all electronic trading and clearing platforms owned or controlled by CME Group, including CME Globex. Mack’s suspension will run from December 1, 2015, to February 28, 2017, inclusive.

EFFECTIVE DATE:

December 1, 2015