NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CME 10-06936-BC

MEMBER:

Michael Gerry Hamann

CME RULE VIOLATIONS:

Rule 539. Prearranged, Pre-Negotiated and Noncompetitive Trades Prohibited

C. Pre-Execution Communications Regarding Globex Trades

Parties may engage in pre-execution communications with regard to transactions executed on the Globex platform where one party (the first party) wishes to be assured that a contra party (the second party) will take the opposite side of the order under the following circumstances:

4. In the case of options orders, subsequent to the pre-execution communication, a Request for Quote (“RFQ”) for the particular option or option spread or combination must be entered into Globex. Thereafter, a Request for Cross (“RFC”) order which contains both the buy and the sell orders must be entered into Globex no less than fifteen (15) seconds and no more than thirty (30) seconds after the entry of the RFQ in order to proceed with the trade, except in equity options where the RFC order must be entered no less than five (5) seconds and no more than thirty (30) seconds after the entry of the RFQ. The RFQ and the RFC order must be entered within the same trading session. Failure to enter the RFC order within 30 seconds after the entry of the RFQ will require a new RFQ to be entered prior to the entry of the RFC order, which must be entered in accordance with the time parameters described above in order to proceed with the trade.

Rule 540. Responsibility for Customer Orders

A. Standard Responsibility

A Member is prohibited from directly or indirectly guaranteeing the execution of an order or any of its terms such as the quantity or price…

FINDINGS:

Pursuant to an offer of settlement in which Michael Gerry Hamann (“Hamann”) neither admitted nor denied the rule violations upon which the penalty is based, on July 28, 2011, a panel of the CME Business Conduct Committee found that on December 21, 2009, Hamann contacted the CME Globex Control Center (“GCC”) to report the execution of a 200-lot June 2010 Japanese Yen (“Yen”) option spread trade as a block trade. When he learned from the GCC that the trade quantity was insufficient to trade as a block, Hamann requested the GCC’s assistance in building the specific Yen option spread strategy and entering a Request for Quote (“RFQ”) into the CME Globex electronic trading platform. Hamann subsequently entered buy and sell orders on Globex for the Yen option spread before 15 seconds elapsed after the RFQ, and did so without entering a Request for Cross. Immediately after executing this trade, Hamann acknowledged in a recorded conversation with the GCC that he knew he was supposed to have waited a prescribed period of time but stated he could not take that price risk. Additionally, Hamann guaranteed the differential of the spread to his customer prior to the trade’s execution. The panel found that in so doing Hamann violated CME Rules 539.C.4. and 540.A.

PENALTY:

In accordance with the settlement offer the Panel fined Hamann $25,000 and suspended his membership privileges, access to any CME Group trading floor, and direct and indirect access to any CME Group electronic trading or clearing platform for 20 business days, beginning on the effective date below and continuing through and including August 26, 2011.

EFFECTIVE DATE:

August 1, 2011