NOTICE OF DISCIPLINARY ACTION

FILE NO.:

COMEX 11-8253-BC

MEMBER:

JOHN FORLENZA

COMEX RULE VIOLATIONS:

521. REQUIREMENTS FOR OPEN OUTCRY TRADES
In open outcry trading, bidding and offering practices must at all times be conducive to the competitive execution of transactions. All open outcry transactions, including spread and combination transactions, shall be made openly and competitively in the pit designated for the trading of the particular transaction. No bid or offer shall be specified for acceptance by a particular trader. Transactions may take place only at the best price available in the open outcry market at the time the trade occurs.

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.

539. PREARRANGED, PRE-NEGOTIATED AND NONCOMPETITIVE TRADES PROHIBITED

 
539.A. General Prohibition (states in pertinent part:)
No person shall prearrange or pre-negotiate any purchase or sale or noncompetitively execute any transaction . . .

FINDINGS:

Pursuant to an offer of settlement John Forlenza (“Forlenza”) presented at a hearing on February 5, 2014, in which Forlenza neither admitted nor denied the rule violation upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“BCC”) found that at the time of the conduct, Forlenza was a COMEX member and thus subject to the jurisdiction of the Exchange and that on multiple occasions during the time period from March 2011 to May 2011, Forlenza accommodated other brokers in the execution of pre-arranged noncompetitive trades and engaged in wash trades by buying/selling for his account opposite the other broker, thereby allowing the broker to take the opposite side of his customer indirectly. As a result, Forlenza realized profits in the amount of $2,175.

The Panel found that, as a result, Forlenza violated Exchange Rules 521 (“Requirements for Open Outcry”), 539.A. (“Pre-Arranged Trading) and 534 (“Wash Trades Prohibited”).

PENALTY:

In accordance with the settlement offer, the Panel ordered Forlenza to pay a $50,000 fine, disgorge profits in the amount of $2,175 and to serve a five (5) week suspension of any access to any CME Group Inc. trading floor and of direct and indirect access to all electronic trading and clearing platforms owned or controlled by CME Group Inc., including CME Globex. The suspension will run from February 7, 2014 through March 13, 2014.

EFFECTIVE DATE:

February 7, 2014