CME Suspends Two Traders For Running Up $40 Million Margin Deficit

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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