NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CBOT 16-0586-BC

MEMBER:

Scott Keegan

CBOT RULE VIOLATIONS:

Rule 575. Disruptive Practices Prohibited (in part)

All orders must be entered for the purpose of executing bona fide transactions. Additionally, all non-actionable messages must be entered in good faith for legitimate purposes.

D. No person shall enter or cause to be entered an actionable or nonactionable message with intent to disrupt or with reckless disregard for the adverse impact on, the orderly conduct of trading or the fair execution of transactions.

Market Regulation Advisory Notice Disruptive Practices Prohibited Rule 575 RA1516-5: (in part)

Q22: Is the creation or execution of User Defined Spreads (“UDS”) for the purposes of deceiving or disadvantaging other market participants a violation of Rule 575?

A22: Yes. Although the CME Globex system provides certain protections such as reasonability checks with respect to option deltas and the futures price on covered instruments, the UDS functionality requires users to exercise diligence and care in the creation of option spread instruments, including the creation of covered option strategies.

Market participants are reminded that knowingly creating and/or trading UDS instruments in a manner intended to deceive or unfairly disadvantage other market participants is considered a violation of Rule 575.

FINDINGS:

Pursuant to an offer of settlement in which Scott Keegan (“Keegan”) neither admitted nor denied the rule violations or factual findings upon which the penalty is based, on December 20, 2018, a Panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee (“Panel”) found that on multiple occasions between September 6, 2016, and November 18, 2016, Keegan entered multiple orders in various covered user-defined spreads in the Treasury futures complex in a manner intended to disrupt or with reckless disregard for the adverse impact on other market participants.

Specifically, the Panel found that Keegan entered orders on both the buy and sell side of an instrument in a manner to be over-allocated futures with a price better than the prevailing outright market and entered orders in a manner to be under-allocated futures with a price worse than the prevailing outright market. The Panel thus concluded that Keegan thereby violated CBOT Rule 575.D.

PENALTY:

In accordance with the settlement offer, the Panel ordered Keegan to pay a fine in the amount of $20,000 and to serve a 15-business day suspension from accessing any CME Group Inc. trading floor and all direct and indirect access to all electronic trading and clearing platforms owned or controlled by CME Group Inc. The suspension shall begin on the effective date below and continue through January 15, 2019, inclusive.

EFFECTIVE DATE:

December 24, 2018