NOTICE OF DISCIPLINARY ACTION

FILE NO.:

NYMEX 10-11-BC
 

MEMBER:

Richard Meister (RXM)

(LEGACY) NYMEX RULES:

6.11 Confirmation of Trades Executed on the Trading Floor

(B) Each Trading Member executing a purchase or sale, on the Exchange trading floor, or his designated authorized representative, shall be responsible for assuring that such Member’s transactions are properly assigned to the appropriate Clearing Member prior to his leaving the premises of the Exchange.

6.19 Type Indicator Codes

(A)(1) When a Floor Trading Member executes trades for his/her personal account, for an account he/she controls, or for an account which he/she has an ownership interest, he/she shall designate the trades CTI 1.

(A)(3)(a) When a Floor Trading Member executes trades for the personal account of another Floor Trading Member, or for an account that the Floor Trading Member knows is controlled by another Floor Trading Member, he/she shall designate the trades as CTI 3.

(C) It shall be a Major Offense for Floor Trading Members…to knowingly assign false indicator codes to trades executed on the Exchange Floor…

6.41 Trading Standards for Floor Brokers

(A) No Trading Member shall purchase any commodity for future delivery…or his own account…while holding an order of another person for the purchase of any future…in the same commodity which is executable at the market price or at the price at which such transaction can be made for the Member’s own account….

(B) No Trading Member shall sell any commodity for future delivery…or his own account…while holding an order of another person for the sale of any future…in the same commodity which is executable at the market price or at the price at which such transaction can be made for the Member’s own account. 

(E) No Floor Member on the Floor having an order from another person may take the opposite side of the transactions for himself, directly or indirectly,…
 

(LEGACY) EXCHANGE RULES:

8.50 Reports and Records

(B) The Exchange and each Member,…and employees of the foregoing shall keep a record in accordance with the rules and regulations of the Commodity Futures Trading Commission,
…showing the details and terms of all…futures…transactions entered into by them, consummated on or subject to the Bylaws and Rules of the Exchange…. Such record shall be kept for a period of five years from the date thereof, …
 

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

(23)(a) Supervision. To fail to supervise any employee of a Member or Member Firm adequately to prevent the violation by such employee of any Exchange Rule that: (i) results in substantial detriment to the welfare and interests of the Exchange; (ii) results in harm to a customer or another Member or Member Firm; or (iii) otherwise constitutes a Major Offense.

FINDINGS:

Pursuant to an offer of settlement in which Richard Meister (also known by badge “RXM” and hereinafter “Meister”), a Member of the NYMEX Division neither admitted nor denied the findings, a panel of the NYMEX Business Conduct Committee (hereinafter known as the “BCC Panel”), found that on December 5, and 12, 2006, and January 16, 17, 24, and 25, 2007, Meister acted in bad faith by trading ahead of and offsetting trades opposite customer orders to trade NYMEX futures, permitted his NYMEX employee clerks to initiate trades in NYMEX heating oil and gasoline futures, and failed to supervise his employee clerks to ensure executed trades were allocated properly which resulted in profits for the broker’s account and calculable disadvantage to customers. In addition, Meister failed to produce records in response to an investigation-related request.

Therefore, the BCC panel found that Meister committed violations of the following legacy NYMEX and Exchange Rules: NYMEX Rules 6.11(B); 6.19(A)(1), (A)(3)(a), and (C); 6.41(A), (B), and (E); and Exchange Rules 8.50(B), 8.55(A)(2), and 8.55(A)(23)(a). The BCC Panel accepted the terms of the offer at a BCC hearing held on April 13, 2011.

PENALTY:

In accordance with the settlement offer and its findings, the BCC Panel ordered that Meister (i) pay a fine in the amount of $75,000 to the Exchange; (ii) pay restitution in the amount of $10,815; (iii) accept a bar from applying for, owning, or holding a membership of any exchange owned or controlled by CME Group for a period of one 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 subsequent similar rules violations. This decision became final on April 14, 2011 and effective on April 18, 2011.

EFFECTIVE DATE:

April 18, 2011