NOTICE OF DISCIPLINARY ACTION

FILE NO.:

NYMEX 10-7565-BC

NON-MEMBER:

NEIL BROOKES

NYMEX RULE VIOLATIONS:

Rule 432.Q. General Offenses – Acts Detrimental

It shall be an offense to commit an act which is detrimental to the interest or welfare of the Exchange or to engage in any conduct which tends to impair the dignity or good name of the Exchange.

FINDINGS:

Pursuant to an offer of settlement in which Neil Brookes neither admitted nor denied the rule violations upon which the penalty is based, on December 21, 2011, a Panel of the NYMEX Business Conduct Committee (“Panel”) found that on February 3, 2010, beginning at approximately 1:26:28 p.m. CST, an automated trading system (“ATS”) operated by Infinium Capital Management malfunctioned. The malfunction caused Infinium to enter 6,767 individual one-lot limit orders into the CME Globex electronic trading platform to purchase March 2010 Light Sweet Crude Oil futures (“Crude”) contracts over the course of approximately three seconds. By 1:26:52 p.m., Infinium had purchased 4,612 Crude contracts at prices ranging from 76.67 to 77.45. The remaining 2,155 one-lot orders were cancelled.

The Panel found that on February 3, 2010, Brookes, then an Infinium employee, was “live-testing” an algorithmic strategy he had developed. However, an error in the configuration file with which the algorithm was linked resulted in the placing of the series of “one-lot” orders described in the preceding paragraph. In his testing, Brookes relied upon an Infinium order control safety system which had successfully functioned many times before. That safety system was to automatically shutdown trading if Infinium obtained 10 fills or more per second. On February 3, 2010, that safety system did not function properly and the expected shutdown did not occur. Although Brookes had no responsibility for creating, maintaining, or supervising that safety system, he was responsible for entering the trades in question. 
 

The Panel found that in so doing, Brookes violated NYMEX Rule 432.Q.

PENALTY:

In consideration of the offer of settlement, the Panel:

1. fined Brookes $50,000; and

2. suspended Brookes’ trading privileges on any CME Group trading or clearing platform, which shall include direct and indirect access to CME Globex, for 25 business days commencing on the effective date below and continuing through January 30, 2012, inclusive.

EFFECTIVE DATE:

December 23, 2011