CME fines and suspends trader for prearranged trades
CME Group has issued a notice of disciplinary action against William Kerstein. The trader has agreed to a suspension and a fine as a part of a settlement with the Exchange.
Pursuant to the offer of settlement, William Kerstein neither admitted nor denied the rule violations or factual findings upon which the penalty is based. A Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee found that on multiple occasions between June 28, 2018, and June 13, 2019, Kerstein, while acting as a local in the Standard and Poor’s 500 Stock Price Index (“S&P”) futures pit, prearranged and noncompetitively executed trades opposite other local traders.
Further, Kerstein executed the trades opposite the locals without openly bidding or offering the orders. Specifically, the Panel found that after the locals initiated a position for S&P futures in the pit, Kerstein, through his clerk, executed a trade on Globex for a corresponding quantity of E-mini S&P futures contracts in the opposite direction of the locals’ S&P futures pit trade. Shortly thereafter, Kerstein and the locals carded up a trade opposite each other in order to offset positions in both accounts.
The Panel concluded that Kerstein violated Rules 521 and 539.
Additionally, the Panel found that on two occasions during this same time period, Kerstein, while in possession of an executable customer order for one or more S&P contracts, executed a trade for his personal account in the same direction as the customer order. The Panel concluded that Kerstein violated Rule 530.
In accordance with the settlement offer, the Panel ordered Kerstein to pay a $40,000 fine and suspended Kerstein from all direct and indirect access to any designated contract market, derivatives clearing organization, or swap execution facility owned or controlled by CME Group Inc. for 30 business days after the fine is paid in full.
The notice is effective May 20, 2021.