NOTICE OF DISCIPLINARY ACTION

NON-MEMBER:

Donald M. Gottsch

CME RULE VIOLATIONS:

Rule 534 (“Wash Trades Prohibited”)(in part)

No person shall place or accept buy and sell orders in the same product and expiration month . . . 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 should also be deemed to violate the prohibition on wash trades.

Market Regulation Advisory Notice RA0913-5 FAQ (Excerpt)

Q11- Under what circumstances is trading with oneself on the electronic platform a violation of exchange rules regarding wash trading?

A11- Rule 534 provides that buy and sell orders for accounts with common beneficial ownership must be entered in good faith for the purpose of making bona fide transactions. Thus, it is a violation of Rule 534 for a market participant to enter an order on the electronic system that he knew or should have known would match with a resting order on the other side of the market for an account with common beneficial ownership.

FINDINGS:

Pursuant to an offer of settlement in which Donald Gottsch neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel”) found that Gottsch was subject to the jurisdiction of the Exchange pursuant to Rules 402 and 418. The Panel also found that on December 11, 2012, and on December 17, 2012, Gottsch, acting as a broker, executed several opposing buy and sell iceberg orders on the CME Globex trading platform in the expiring Live Cattle futures contract where there was common beneficial ownership on both sides of the transactions. Gottsch entered the opposing buy and sell orders for the purpose of freshening long futures position dates, and he reasonably should have known that the orders he placed would trade opposite one another. As a result of these wash trades, 723 contracts were traded between the accounts with common beneficial ownership. The Panel concluded that Gottsch thereby violated CME Rule 534.

PENALTY:

In accordance with the settlement offer, the Panel ordered Donald Gottsch to pay a fine of $20,000 and suspended his direct access to any trading floor or electronic trading or clearing platform owned or operated by CME Group, including Globex, for 15 business days. Gottsch’s suspension will run from April 17, 2015, to May 7, 2015, inclusive.

EFFECTIVE DATE:

April 17, 2015