CME Suspends Two Traders For Running Up $40 Million Margin Deficit
May 25 2010 - 1:56PM
Dow Jones News
CME Group Inc. (CME) said Tuesday that it suspended two
independent traders who circumvented exchange rules with orders
that left one of their accounts under-margined by more than $40
million.
A disciplinary committee on Monday took "emergency action"
against member Kent Whitney and barred him from all CME markets for
six months, said the exchange operator in a notice.
Whitney was already meant to be barred from all CME markets
under an existing action, but used floor clerks to place orders in
options on S&P 500 index futureslast month on behalf of David
Parrish, a non-member.
"The execution of these orders created a margin deficit in
excess of $40 million, which would have caused Parrish's account to
be far under-margined," said CME of the April 16 dealings.
It also barred Parrish for six months.
CME declined to comment on how Whitney got around the existing
prohibition against his accessing CME's markets. Whitney and
Parrish couldn't be reached for comment.
Risk-management functions across the U.S. exchange sector are
under intensifying scrutiny following the market gyrations of May
6.
While no anomalous trading was found to have taken place at CME
or other exchanges that day, regulators are scrutinizing trade data
to piece together the chain of events that prompted a
near-1,000-point plunge and subsequent rebound in the Dow Jones
Industrial Average.
A panel convened by CME on Monday found that both Whitney and
Parish have been or will be "conducting business in a manner that
cannot be permitted to continue without jeopardizing the safety of
customer funds, members or the exchange," according to the Tuesday
notice.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com
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