NOTICE OF DISCIPLINARY ACTION

FILE NO.:

NYMEX 10-7443-BC

NON-MEMBER:

FREDERICK FERRIOLA

NYMEX RULE VIOLATIONS:

NYMEX LEGACY RULE 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.

NYMEX LEGACY RULE 6.41 TRADING STANDARDS FOR FLOOR BROKERS

(E) No Floor Member on the Floor having an order from another person may take the opposite side of the transaction for himself, directly or indirectly, or for an account of: i) any firm, corporation or other entity of which he is a partner, officer, employee or otherwise a member of a broker association; or ii) any partner, officer, employee or broker association member of an entity listed in subparagraph (i) of this Rule, nor may he execute a trade on behalf of himself of a customer opposite any broker with whom he is affiliated.

NYMEX LEGACY RULE 6.61 PRE-ARRANGED TRADES

Pre-arranged trades are prohibited.

NYMEX LEGACY RULE 6.90 TRADING CARD PROCEDURES

(B) … All transactions must be recorded in exact chronological order of execution on sequential lines of the trading card without skipping lines between trades.

NYMEX LEGACY RULE 8.50 REPORTS AND RECORDS

(B) The Exchange and each Member, Member Firm and employees of the foregoing shall keep a record in accordance with the rules and regulations of the Commodity Futures Trading Commission and as said Commission may direct, showing the details and terms of all cash, futures and options transactions entered into by them, consummated on or subject to the Bylaws and Rules of the Exchange. Such record shall be in permanent form, showing the parties to all such transactions, including the persons for whom made; any assignments or transfers thereof, with the parties thereto, and the manner in which said transactions are fulfilled, discharged or terminated. Such record shall be kept for a period of five years…...

NYMEX LEGACY RULE 11G.18 TRADING STANDARDS FOR ELECTRONIC TRADING SYSTEMS

(F) A Globex User shall not make any purchase or sale, or shall not enter an order through Globex, to effect a trade that has been prearranged. The foregoing restriction shall not apply to transactions executed pursuant to permissible Pre-Execution Discussions in accordance with the provisions of Rule 11G.19.

NYMEX LEGACY 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;
(3) to be guilty of any dishonest conduct;
(7) to engage in wash trading or accommodation trading.

FINDINGS:

Pursuant to an offer of settlement Frederick Ferriola (“Ferriola”) presented at a hearing on June 12, 2014, in which Ferriola neither admitted nor denied the rule violations or the findings or conclusions herein upon which the penalty is based, a Panel of the NYMEX Business Conduct Committee (“BCC”) found that Ferriola voluntarily submitted himself to the jurisdiction of the BCC for purposes of settling this matter and that in March 2008 as a broker on the floor of the Exchange, Ferriola participated in 16 non-competitive pre-arranged trades, seven of which as the executing broker of a customer order during which he indirectly took the opposite side of that order by buying and selling opposite the same trader. This conduct occurred both on Globex and in the Platinum and Palladium ring. As a result of this conduct, Ferriola realized a profit of $94,135. Furthermore, on two occasions, Ferriola failed to record his transactions in chronological order of execution on his trading card. Ferriola also failed to produce his trading card for March 5, 2008. The Panel found that as a result, Ferriola violated Legacy NYMEX Rules 6.05(A)(1) (Transactions, Bids and Offers on the Trading Floor), 6.41 (Trading Standards for Floor Brokers), 6.61 (Pre-Arranged Trades), 6.90(B) (Trading Card Procedures), 11G.18 (Trading Standards for Electronic Trading Systems), 8.50 (Records and Reports), 8.55(A)(2) (Fraud or Bad Faith), 8.55(A)(3) (Dishonest Conduct) and 8.55(A)(7) (Wash or Accommodation Trades).

PENALTY:

In accordance with the settlement offer and taking into consideration Ferriola’s financial condition when levying the sanction, the Panel ordered Ferriola to disgorge profits in the amount of $94,135. The Panel also ordered Ferriola to serve a five (5) year suspension from (i) applying for membership at any exchange owned, controlled, or operated by CME Group Inc., and (ii) directly or indirectly accessing, placing orders, or executing trades on any trading or clearing platform owned, controlled, or operated by CME Group Inc., including, but not limited to, the CME Globex electronic trading platform. The suspension shall run from June 16, 2014 through June 16, 2019, inclusive.

EFFECTIVE DATE:

June 16, 2014