NOTICE OF DISCIPLINARY ACTION

FILE NO.:

COMEX 10-07511-BC

MEMBER:

WILLIAM GALARZA (GATO)

COMEX RULE VIOLATIONS:

Legacy COMEX Rule 104.21 – OPEN OUTCRY

Except to the extent otherwise permitted by the By-Laws and Rules, every order to buy and sell, and every purchase and sale of, a futures contract or futures option must be offered or executed openly and competitively by public outcry in a ring specified in the By-Laws and Rules.

Legacy COMEX Rule 104.27 – PREARRANGED TRADES

Except to the extent permitted by the By-Laws and Rules, members are prohibited from making, or attempting to make, any purchase of sale of a futures contract or futures option which directly or indirectly has been prearranged.

Legacy COMEX Rule 104.34 – WITHHOLDING ORDERS

A floor member is prohibited from withholding or withdrawing from the market all or part of an order of another person for the convenience of another member.

NYMEX RULE VIOLATION:

Legacy NYMEX Rule 8.55 – CLASSIFICIATION OF OFFENSES

(A) Major Offenses – No Member, Member Firm, or any employee of the foregoing shall commit a violation of any of the following rules, which shall be deemed major offenses of the Exchange.

(18) to commit an act which is substantially detrimental to the interests or welfare of the Exchange.

FINDINGS:

Pursuant to an offer of settlement in which William Galarza (“Galarza”) neither admitted nor denied the rule violations upon which the penalty is based for purposes of resolving this matter, on July 27, 2011, a panel of the COMEX Business Conduct Committee (the “Panel”) found there was a reasonable basis to believe that on October 13, 2008, Galarza engaged in one (1) noncompetitive, prearranged trade of COMEX Silver options while in possession of an executable customer order that he withheld from the marketplace and allowed other select traders to realize gains by noncompetitively trading opposite this order. As a result of this trade, the customer order was disadvantaged by $8,200.

Further, the Panel found a reasonable basis to believe that from October 2008 to November 21, 2008, Galarza engaged in three (3) noncompetitive, prearranged trades of COMEX Silver and Gold options opposite another broker’s customer order without bidding or offering in the ring. As a result of these trades Galarza profited $4,900.

The Panel found that in so doing, there was a reasonable basis to believe Galarza violated Legacy COMEX Rules 104.21, 104.27, 104.34(a), and Legacy NYMEX Rule 8.55(A)(18).

PENALTY:

In accordance with the settlement offer, the Panel ordered Galarza to (i) pay a fine to the Exchange in the amount of $35,000; (ii) disgorge $4,900 in profits; (iii) pay restitution to Galarza’s customer in the amount of $8,200; (iv) serve a suspension for a period beginning on the effective date of the Panel’s decision and lasting one (1) month from the date the fine is paid in full of his 1) membership privileges, 2) access to all CME Group Inc. trading floors, and 3) direct access to all electronic trading and clearing platforms owned or controlled by CME Group, including CME Globex; and (v) serve a suspension for a period lasting five (5) months from filling brokerage to begin following the conclusion of the one month suspension described in paragraph (iv). 
 

EFFECTIVE DATE:

August 1, 2011