NOTICE OF DISCIPLINARY ACTION

FILE NO.:

NYMEX 12-08954-BC

NON-MEMBER:

J.P. MORGAN CHASE BANK

 

EXCHANGE RULES: NYMEX RULE 432: GENERAL OFFENSES (in part)

It shall be an offense:

W. for a Member to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange;

NYMEX RULE 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.

FINDINGS:

Pursuant to an offer of settlement J.P. Morgan Chase Bank (“JPM”) presented at a hearing on January 15, 2013, in which JPM neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the NYMEX Business Conduct Committee (“BCC Panel”) found that it has jurisdiction over JPM because it is an affiliate of a NYMEX member and that on 3 separate occasions between October 2011 and March 2012, in an effort to manage position limits, a trader employed by JPM entered into block trades, which were executed by floor brokers, between separate legal entities with common beneficial ownership during the last three days prior to expiration of the particular contract. The BCC Panel also found that in each of these 3 instances, while managing positions for the bank, the trader decided to enter the order for both the buy and sell side of the trade.

The BCC Panel found that as a result, JPM violated NYMEX Rules 432.W and 534.

PENALTY:

In accordance with the settlement offer, the BCC Panel ordered JPM to pay a fine to the Exchange in the amount of $50,000.

EFFECTIVE DATE:

January 17, 2013