NOTICE OF DISCIPLINARY ACTION

FILE NO.:

NYMEX 13-9434-BC

MEMBER:

J.P. MORGAN SECURITIES LLC 

NYMEX RULE VIOLATION: 770. DELIVERY OFFSET PROCEDURES

A clearing member who, as the result of an error, omission or outtrade discovered on or after the last day of trading, carries a position in a contract which has expired and for which the position holder is unable to fulfill the obligation to make or take physical delivery in that contract may, with the consent of the account owner(s) or controller(s), request to offset such position against an opposite position held by an account with different beneficial ownership through a trade transfer; provided, however, that the parties to an error or outtrade must exercise the utmost diligence to resolve the error or outtrade.

Delivery offset requests must be made to the Clearing House. Trade transfers pursuant to this Rule require that the Clearing House receive acceptance from an account(s) with different beneficial ownership and confirmation of the agreed upon transfer by the party initiating the request. Such confirmation must be submitted in writing on the form specified by the Clearing House. All positions transferred pursuant to this Rule shall take place at the final settlement price of the contract.

Clearing member firms representing accounts that have transferred a trade pursuant to this Rule must correctly report the change in open interest to the Clearing House pursuant to the schedule established by the Exchange.

In the event a delivery offset request does not result in a trade transfer, delivery shall take place as required under Exchange rules.

Nothing in this Rule relieves a clearing member of its responsibilities with respect to open positions in an expiring contract month in a physically delivered contract as set forth in Rule 716.

FINDINGS:

Pursuant to an offer of settlement J.P. Morgan Securities LLC (“JP Morgan”) presented at a hearing on December 19, 2013 in which JP Morgan neither admitted nor denied the rule violation upon which the penalty is based , a Panel of the NYMEX Business Conduct Committee (“BCC”) found that it had jurisdiction over JP Morgan pursuant to Exchange Rules 400 and 402 as the conduct occurred while JP Morgan was a NYMEX member and that on April 30, 2013, JP Morgan, on behalf of its customer and position holder, Cargill Incorporated (“Cargill”), executed the transfer of 2 May 2013 NY Harbor ULSD (“HO”) Futures contracts to another entity, despite Cargill’s ability to take physical delivery or otherwise fulfill its obligation. Cargill’s delivery obligation in May13 HO was then extinguished as the other entity assumed the delivery obligation.

The Panel found that as a result, JP Morgan violated Rule 770.

PENALTY:

In accordance with the settlement offer, the Panel ordered JP Morgan to pay a fine to the Exchange in the amount of $8,000.

EFFECTIVE DATE:

December 23, 2013