NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CME 15-0237-BC

NON-MEMBER:

Image Securities

CME RULE VIOLATIONS:

Rule 432 (“General Offenses”)(in part)

It shall be an offense:

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

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.

Rule 576 (“Identification of Globex Terminal Operators”)

Each Globex terminal operator shall be identified to the Exchange, in the manner prescribed by the Exchange, and shall be subject to Exchange rules. If user IDs are required to be registered with the Exchange, it is the duty of the clearing member to ensure that registration is current and accurate at all times. Each individual must use a unique user ID to access Globex. In no event may a person enter an order or permit the entry of an order by an individual using a user ID other than the individual’s own unique user ID.

FINDINGS:

Pursuant to an offer of settlement in which Image Securities (“Image”) neither admitted nor denied the rule violations up which the penalty is based, on November 29, 2017, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel”) found that on numerous occasions between December 1, 2014, and March 31, 2015, Image, through one of its employees, executed wash trades in multiple futures contracts on Globex. The matching buy and sell orders were entered with the knowledge and intent that the orders would match opposite one another. The purpose of these transactions was to move positions between accounts in order to manage margin calls. The Panel found that Image failed to diligently supervise its trader in a manner sufficient to ensure that his conduct was consistent with Exchange Rules. Additionally, the Panel found that Image permitted a trader to enter orders on Globex using another employee’s user ID.

The Panel concluded that Image thereby violated CME Rules 432.W., 534 and 576.

PENALTY:

In accordance with the settlement offer, the Panel ordered Image to pay a fine of $85,000.

EFFECTIVE DATE:

December 1, 2017