NOTICE OF DISCIPLINARY ACTION

FILE NO.:

NYMEX 09-05-BC

MEMBER:

Joseph Steo (STEO)
 

(LEGACY) NYMEX RULES:

6.05 Transactions, Bids, and Offers on the Trading Floor

(A) Except as otherwise specifically provided in the Bylaws and Rules, all purchases, sales, bids and offers for futures and options contracts:
(1) shall be executed openly and competitively by open outcry in the appropriate trading ring during the authorized hours of trading;

6.61 Pre-Arranged Trades

 
Pre-arranged trades are prohibited. 

(LEGACY) EXCHANGE RULE:

8.55 Classification 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.
(2) to be guilty of fraud or any act of bad faith;

FINDINGS:

On January 19-21 and 25, February 8, and March 1, 2010, a hearing was held before a Panel of the NYMEX Business Conduct Committee (the “Panel”). The Panel found, based upon the evidence presented, that on August 3, 6, and 10, 2007, Joseph Steo (“Steo”) engaged in five (5) non-competitive, prearranged trades of NYMEX Natural Gas futures contracts while in possession of executable customer orders and permitted another broker to realize ill-gotten gains by non-competitively trading opposite these orders. Additionally, the Panel found that on July 30 and August 10, 2007, Steo engaged in two (2) non-competitive, prearranged trades opposite another broker’s customer orders to buy or sell NYMEX Natural Gas futures contracts without bidding or offering in the ring. These trades resulted in ill-gotten gains for Steo in the amount of $4,100. Finally, the Panel found that on August 6, 2007 Steo traded Natural Gas futures contracts opposite a broker in a manner that did not conform with the rules requiring that a trade be executed via “open outcry.”

The Panel found that in so doing, Steo violated Legacy NYMEX Rules 6.05(A)(1), 6.61 and Legacy Exchange Rule 8.55(A)(2).  

PENALTY:

Based upon the record in this matter and the findings and conclusions set forth above, the Panel ordered that Steo: (i) pay a fine to the Exchange in the amount of $85,000; (ii) pay customer restitution in the amount of $18,600; (iii) accept a bar from re-applying for, owning, or holding a membership of any exchange owned or controlled by CME Group for a period of one (1) year from the later of the effective date of the NFA 9.11 Notice or the date on which the fine and restitution penalty amounts are paid in full; and (iv) Cease and desist from future violations of legacy NYMEX Rule 6.05(A)(1), 6.61; and legacy Exchange Rule 8.55(A)(2) and similar rule violations. This decision became final on May 10, 2011 and effective on May 27, 2011. 

EFFECTIVE DATE:

May 27, 2011