NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CME 14-0049-BC

MEMBER:

ELLIOTT D. REICHEL (EDR)

CME RULE VIOLATIONS:

Rule 521. Requirements for Open Outcry Trades (in part)

In open outcry trading, bidding and offering practices must at all times be conducive to the competitive execution of transactions. All open outcry transactions, including spread and combination transactions, shall be made openly and competitively in the pit designated for the trading of the particular transaction. No bid or offer shall be specified for acceptance by a particular trader. Transactions may take place only at the best price available in the open outcry market at the time the trade occurs.

Rule 522. Acceptance of Bids and Offers

In open outcry and electronic trading, while outstanding, all or any part of any bid or offer is subject to immediate acceptance by any trader. Members are required to honor all bids or offers which have not been withdrawn from the market. The price at which a trade is executed shall be binding, unless such trade is cancelled by Exchange officials in accordance with Exchange rules.

Rule 530. Priority of Customers’ Orders

A member shall not buy (sell) a futures contract, buy (sell) a call option or sell (buy) a put option for his own account, an account in which he has a direct or indirect financial interest, or an account over which he has discretionary trading authority when he is in possession of an executable order for another person to buy (sell) a futures contract, buy (sell) a call option or sell (buy) a put option in the same product, regardless of the venue of execution. All contract months in a given futures product and all options on the futures product, in addition to any corresponding alternative sized (mini or micro) futures or options contracts on a given product, shall be considered the same product for the purposes of this rule.

Rule 531. Trading Against Customers’ Orders Prohibited

A. General Prohibition

No person in possession of a customer order shall knowingly take, directly or indirectly, the opposite side of such order for his own account, an account in which he has a direct or indirect financial interest, or an account over which he has discretionary trading authority.

Rule 539. Prearranged, Pre-Negotiated and Noncompetitive Trades Prohibited (in part)

A. General Prohibition

No person shall prearrange or pre-negotiate any purchase or sale or noncompetitively execute any transaction.

FINDINGS:

Pursuant to an offer of settlement in which Elliott D. Reichel (“Reichel”) neither admitted nor denied the rule violations upon which the penalty is based, on October 30, 2017, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“Panel”) found that on one or more occasions between March 2015 and June 2015 Reichel, while executing a customer order in the S&P 500 futures (“S&P”) pit, failed to transact at the best trade price available in the open outcry market at the time the trade(s) occurred. Specifically, on two occasions Reichel bought (sold) for customer orders while other traders in the S&P pit offered (bid) two to three ticks lower (higher) than the prices at which Reichel filled his customer orders. The Panel further found that on one or more occasions between October 2014 and June 2015, Reichel failed to treat an executed trade as binding, as the trade ultimately cleared at a different price than it was originally executed at in the pit. Specifically, after executing trades for customer orders opposite other traders in the S&P pit at one price, Reichel changed the execution price to one more favorable to the other traders. Additionally, on two occasions on May 13, 2015, Reichel executed a customer order opposite a local in the S&P 500 pit without bidding or offering his order in a manner consistent with open and competitive trades.

Further, the Panel found that on June 23, 2017, Reichel, a dual trader and while in possession of an executable customer order, traded in the same futures product for his personal account before filling the order. During the cash close of the equities market, Reichel liquidated his personal position by indirectly taking the opposite side of his customer order, realizing a profit for his personal account in doing so.

The Panel concluded that as a result of the foregoing, Reichel violated CME Rules 521, 522, 530, 531, and 539.A.

PENALTY:

In accordance with the settlement offer and after taking Reichel’s financial condition into consideration when it levied the sanction, the Panel ordered Reichel to pay a fine in the amount of $10,000, restitution in the amount of $11,500, and to have his access to all CME Group trading floors and direct and indirect access to all electronic trading and clearing platforms owned or controlled by CME Group suspended for a period of four months. The suspension shall run from November 1, 2017, and continue for a period of four months from the date that the ordered fine and restitution are paid in full.

EFFECTIVE DATE:

November 1, 2017