DISCIPLINARY PROGRAM 

RULE ENFORCEMENT REVIEW

OF THE 

CBOT, CME, COMEX, AND NYMEX

Division of Market Oversight

November 21, 2014
2

I. Rule Enforcement Review Scope

The Division of Market Oversight (“Division”) has conducted a rule enforcement review 

of the disciplinary program of the Chicago Board of Trade (“CBOT”), the Chicago Mercantile 

Exchange (“CME”), the Commodity Exchange, Inc. (“COMEX”), and the New York Mercantile 

Exchange, Inc. (“NYMEX”) (collectively, the “Exchanges”), wholly-owned subsidiaries of CME 

Group, Inc. (“CME Group”).

1

The Division’s review of the Exchanges’ disciplinary program 

covered the period from April 1, 2012 to March 31, 2013 (“target period”). The Division 

reviewed the Exchanges’ compliance with Core Principle 13 (Disciplinary Procedures)

2

under 

Section 5(d) of the Commodity Exchange Act, as amended by the Dodd-Frank Wall Street 

Reform and Consumer Protection Act of 2010,

3

and the Commission’s related regulations 

codified in §§ 38.700-712, which relate to an exchange’s disciplinary procedures.4

To evaluate the Exchanges’ disciplinary program, and their compliance with Core 

Principle 13 and Commission regulations §§ 38.700-712, Division staff interviewed compliance 

 

1 Rule enforcement reviews, and the resultant reports prepared by the Division, are intended to present an analysis of 

an exchange’s compliance capabilities during the period under review. Such reviews deal only with exchange 

programs directly addressed in the review and do not assess all programs, core principles, or Commission 

regulations. The Division’s analyses and conclusions are based, in large part, upon the Division’s evaluation of a 

sample of disciplinary case files and other exchange documents. This evaluation process, in some instances, 

identifies specific issues with particular exchange compliance programs or methods, but is not designed to uncover 

every instance where an exchange fails to effectively comply with the core principles or Commission regulations. 

This report, and the analyses and conclusions herein, represent the view of the Division only, and do not necessarily 

represent the position or view of the Commission or of any other office or division of the Commission. The 

Division’s analyses and conclusions in this report are limited to the CBOT, CME, COMEX, and NYMEX.

2 Core Principle 13 - Disciplinary Procedures: The board of trade shall establish and enforce disciplinary procedures 

that authorize the board of trade to discipline, suspend, or expel members or market participants that violate the rules 

of the board of trade, or similar methods for performing the same functions, including delegation of the functions to 

third parties.

3 Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010) 

(“Dodd-Frank Act”). Title VII of the Dodd-Frank Act became effective on July 16, 2011. 

4 On May 10, 2012, the Commission issued its Final Rules, Core Principles and Other Requirements for Designated 

Contract Markets, 77 Fed. Reg. 36612 (June 19, 2012) (“New DCM Regulations”), which became effective during

the target period on October 17, 2012, to codify rules in lieu of guidance and acceptable practices for certain core 

principles, including Core Principle 13. Because the New DCM Regulations were in effect for approximately half 

of the target period, the Division reviewed the Exchanges’ disciplinary program for compliance with the pre-existing 

guidance and acceptable practices as well as the New DCM Regulations, as applicable.
3

officials and staff from CME Group’s Market Regulation Department (“Market Regulation”), which 

provides compliance, enforcement, and other self-regulatory services to the Exchanges, pursuant to 

Regulatory Services Agreements. The Division also analyzed responsive documents produced by 

the Exchanges’ staff, including the following:

 disciplinary case logs and files;

 organizational charts and summaries of personnel and staffing;

 summaries of procedures designed to prevent conflicts of interest;

 minutes of disciplinary committee, Floor Conduct Committee, Board of 

Directors, Executive Committee, and Market Regulation Oversight Committee 

meetings held during the target period; and

 compliance procedures manuals and handbooks, disciplinary rules, and other 

overviews of Market Regulation’s disciplinary procedures.

The Division analyzed the Exchanges’ disciplinary program to determine whether the

program is in compliance with the core principle and Commission regulations stated above, and 

whether there are any deficiencies or recommendations for the program. For purposes of this 

report, a deficiency is an area where the Division believes an exchange is not in compliance with 

a Commission regulation and must take corrective action and a recommendation concerns an 

area where the Division believes the exchange should improve its compliance program.5 As set 

forth below, the Division found that the Exchanges maintain experienced enforcement staff and a 

generally adequate disciplinary program to demonstrate compliance with Core Principle 13 and 

Commission regulations § 38.700 and §§ 38.702-712. With respect to Commission regulation § 

 

5 The Division notes that Market Regulation is primarily responsible for administering the disciplinary program of

each of the Exchanges. Therefore, any recommendation or deficiency related to Market Regulation is a 

recommendation or deficiency that applies to all of the Exchanges.
4

38.701, however, the Division identified one deficiency and made one recommendation for 

improvement.

The Division provided the Exchanges with an opportunity to review and comment on a 

draft of this report on October 9, 2014. On October 15, 2014, Division staff conducted an exit 

conference with the Exchanges’ officials to discuss the report’s findings and recommendations.

II. Summary of Findings, Deficiencies Requiring Corrective Action, and Recommendations 

A. Findings without Deficiencies Requiring Corrective Action or Recommendations

1. Core Principle 13 - § 38.700, Disciplinary Panels - § 38.702, Notice of Charges -

§ 38.703, Right to Representation - § 38.704, Answer to Charges - § 38.705, 

Denial of Charges and Right to Hearing - § 38.706, Hearings - § 38.707, 

Decisions - § 38.708, Final Decisions - § 38.709, and Additional Sources for 

Compliance - § 38.712

 The Division found that the Exchanges have sufficient disciplinary program rules and 

procedures to demonstrate compliance with Core Principle 13 under Section 5(d) of 

the Commodity Exchange Act, as amended by the Dodd-Frank Act, and Commission 

regulations § 38.700, §§ 38.702-38.709, and § 38.712. The Exchanges’ rules are 

designed to ensure due process for disciplinary proceedings, and give the Exchanges 

the authority to discipline, suspend, or permanently bar members or market 

participants found to have committed rule violations.

 

2. Disciplinary Sanctions (Commission Regulation § 38.710)

 The Division found that the Exchanges imposed disciplinary sanctions sufficient to 

demonstrate compliance with Commission regulation § 38.710. During the target 

period, the Exchanges closed 93 disciplinary cases via disciplinary committee (31 for 

CBOT, 28 for CME, four for COMEX, and 30 for NYMEX) involving a total of 113

unique respondents.6 The Division reviewed all 93 closed disciplinary cases and 

found that sanctions imposed during the target period were reasonable relative to the 

violations alleged and the evidence presented. In addition, the Division found that the 

Exchanges’ Business Conduct Committees (“BCC”) consistently considered the 

respondent’s disciplinary history and any customer harm when determining sanctions. 

 In the 93 cases closed during the target period, the Exchanges assessed a total of 

$6,301,500 in fines ranging from $5,000 to $1,000,000 and $2,023,900 in 

disgorgement ranging from $6,000 to $1,080,150. In addition, the Exchanges ordered 

five respondents to pay a total of $602,631 in customer restitution; issued suspensions 

 

6 The Division notes that each respondent was counted only once, even if the respondent was involved in more than 

one disciplinary case. 
5

for 51 individuals ranging from five days to 25 years; and imposed permanent bars on 

membership against 10 respondents.

7

3. Warning Letters (Commission Regulation § 38.711)

 The Division found that the Exchanges’ warning letter practices are sufficient to 

demonstrate compliance with Commission regulation § 38.710. During the target 

period, the Enforcement Group (a sub-group of Market Regulation responsible for 

prosecuting all disciplinary cases for the Exchanges) and the BCC issued a total of 16

warning letters. None of the warning letter recipients received more than one

warning letter during the target period for the same violation.

B. Findings with Deficiencies Requiring Corrective Action or Recommendations

Enforcement Staff (Commission Regulation § 38.701) 

 The Enforcement Group is responsible for prosecuting all disciplinary cases for the 

Exchanges. The Enforcement Group is led by an experienced management team that 

includes an Executive Director in New York and two regional Directors, one in New 

York and one in Chicago. During the target period, the Enforcement Group consisted 

of as many as nine and as few as seven Enforcement Attorneys. In September 2014, 

the Enforcement Group consisted of 13 Enforcement Attorneys.

 Of the 93 cases that were closed during the target period, 64 were closed in less than 

12 months, 23 cases took between 12 and 24 months to close and six cases took more 

than 24 months to close.

8

 Additionally, 39 cases (17 for CBOT, 15 for CME, one for 

COMEX, and six for NYMEX) were referred to the Enforcement Group prior to the 

target period and remained open at the end of the year-long target period. Therefore, 

68 cases were in the disciplinary process for more than a year (“aged cases”).

 Of the 68 aged cases, the Division identified four cases (three for CME and one for 

CBOT) that were not promptly prosecuted due to insufficient staff. For all four cases, 

the Division identified periods of inactivity ranging from four to 14 months where the 

Enforcement Group failed to pursue any resolution to the cases. According to the 

Enforcement Group, these cases sat idle because staff was dedicated to prosecuting 

other cases, due to delay in transitioning a case to a new Enforcement Attorney, or

because the case was of a low priority. Causes of delay in these four cases stemmed 

from insufficient Enforcement Group staffing. In these four cases, the Exchanges 

were deficient in their compliance with Commission regulation § 38.701 

(Enforcement staff), which requires, among other things, that a designated contract 

 

7 Market Regulation defines disgorgement as illicit profits returned to the Exchanges by the respondent and 

restitution as payment to a party financially injured by the respondent’s actions.

8 The time required to close a disciplinary case is measured from the date the case is referred to the Enforcement 

Group to the effective date of the BCC’s decision.
6

market maintain sufficient enforcement staff and resources to effectively and 

promptly prosecute possible rule violations.9

o Deficiency: In order to comply with Commission regulation § 38.701, the 

Exchanges must maintain sufficient enforcement staff to promptly prosecute 

possible rule violations. 

 The Division identified nine aged cases (seven for CBOT and two for CME) that 

were delayed due to protracted deliberations among Market Regulation’s senior 

management regarding the Exchanges’ block trade pre-hedging rules and whether 

disciplinary charges were appropriate. These deliberations delayed the nine aged 

cases by as many as 17 months. Although the Division recognizes the complexity of 

the matter considered by Market Regulation’s senior management, the Division 

believes that the Exchanges should not allow such deliberations to interfere with the 

prompt resolution of disciplinary matters.

o Recommendation: The Exchanges should take appropriate measures to 

ensure that internal deliberations do not interfere with the prompt resolution 

of disciplinary matters.

The accompanying Compliance Matrix in Section III below includes a thorough analysis 

of the Exchanges’ compliance with Core Principle 13 under Section 5(d) of the Commodity 

Exchange Act, as amended by the Dodd-Frank Act, and the Commission’s related regulations 

codified in §§ 38.700-712.

 

9 The four cases that resulted in the deficiency finding all involved staff-related delay that occurred after the 

effective date of the New DCM Regulations. The Division notes that an additional 11 cases were also delayed due

to an insufficiently staffed Enforcement Group. These cases were not included in the deficiency finding only 

because the staff-related delay occurred before the effective date of the New DCM Regulations. 
7

III. Compliance Matrix

CFTC Regulation Findings Regarding the Exchanges’ Compliance

Target Period 4/1/12 – 3/31/13

Deficiencies/Recommendations

Core Principle 13 – Disciplinary Procedures

§ 38.700 Core Principle 13

The board of trade shall establish and 

enforce disciplinary procedures that 

authorize the board of trade to 

discipline, suspend, or expel 

members or market participants that 

violate the rules of the board of trade, 

or similar methods for performing the 

same functions, including delegation 

of the functions to third parties.

The Division found that the Exchanges maintain adequate 

disciplinary procedures which enable the Exchanges to investigate 

potential rule violations, prosecute cases, and discipline members 

or market participants who are found to have violated Exchange 

rules. 

None

§ 38.701 Enforcement Staff

A designated contract market must 

establish and maintain sufficient

enforcement staff and resources to 

effectively and promptly prosecute 

possible rule violations within the 

disciplinary jurisdiction of the 

contract market. A designated 

contract market must also monitor the 

size and workload of its enforcement 

staff annually, and ensure that its 

enforcement resources and staff are at 

appropriate levels. The enforcement 

staff may not include either members 

of the designated contract market or 

The Enforcement Group, within CME Group’s Market Regulation 

Department, is responsible for prosecuting all disciplinary cases 

and is led by an experienced management team that includes an

Executive Director in New York and two regional Directors, one in 

New York and one in Chicago. During the target period, the 

Enforcement Group consisted of as many as nine and as few as 

seven Enforcement Attorneys.10 In August 2014, the Enforcement 

Group consisted of 13 Enforcement Attorneys.

To determine whether the Enforcement Group maintains sufficient 

staff to promptly prosecute possible rule violations, the Division 

reviewed all 93 disciplinary cases closed during the target period

(31 for CBOT, 28 for CME, four for COMEX, and 30 for 

NYMEX).

11 Of the 93 cases that were closed during the target 

See deficiency and recommendation

below.

 

10 The Executive Director and the two regional Directors have management responsibilities but also serve as Enforcement Attorneys; therefore, they are included 

in the Enforcement Attorney total. 

11 Additionally, 68 cases were referred to the Enforcement Group during the target period and remained open at the end of the target period.
8

persons whose interests conflict with 

their enforcement duties. A member 

of the enforcement staff may not 

operate under the direction or control 

of any person or persons with trading 

privileges at the contract market. A 

designated contract market's 

enforcement staff may operate as part 

of the designated contract market's 

compliance department.

period, 64 were closed in less than 12 months, 23 cases took 

between 12 and 24 months to close and six cases took more than 24 

months to close. 

The Division also reviewed all 39 cases (17 for CBOT, 15 for 

CME, one for COMEX, and six for NYMEX) that were referred to 

the Enforcement Group prior to the target period and remained 

open at the end of the year-long target period.12 In total, 68 of the 

cases reviewed by the Division were in the disciplinary process for 

more than one year (29 cases closed during the target period that 

took more than a year to close plus 39 cases that were referred to 

the Enforcement Group prior to the target period and remained 

open at the end of the year-long target period).

Prompt resolution of disciplinary cases is necessary to, among 

other things, discourage further violations of exchange rules. Of 

the 68 aged cases, the Division identified four cases (three for CME 

and one for CBOT) that were not promptly prosecuted due to 

insufficient staff. In CME Case No. 09-06190, CBOT/CME Case 

No. 09-06544, and CME Case No. 09-06429, the Division 

identified periods of inactivity ranging from four to 14 months 

where the Enforcement Group failed to pursue any resolution to the

cases.

13

 According to the Enforcement Group, these cases sat idle 

because staff was dedicated to prosecuting other cases, due to delay 

in transitioning a case to a new Enforcement Attorney, or because 

the case was of a low priority. Consequently, the Enforcement 

Deficiency Requiring Corrective 

Action

The Exchanges must maintain 

sufficient enforcement staff to 

promptly prosecute possible rule 

violations.

 

12 Five cases, involving multiple respondents, were closed during the target period for some respondents and remained open after the target period for other 

respondents. Accordingly, these five cases are counted toward the number of cases closed during the target period as well as toward the number of cases 

remaining open at the end of the target period.

13 CME Case No. 09-06190 took approximately 18 months to close. CBOT/CME Case No. 09-06544 took approximately 33 months to close. CME Case No. 

09-06429 took approximately 36 months to close. 
9

Group was insufficiently staffed while these cases were being 

prosecuted.

14

 

The Division identified nine aged cases (seven for CBOT and two 

for CME) that were delayed due to protracted deliberations among 

Market Regulation’s senior management regarding the Exchanges’ 

block trade pre-hedging rules and whether disciplinary charges 

were appropriate. These deliberations delayed the nine aged cases 

by as many as 17 months. Although the Division recognizes the 

complexity of the matter considered by Market Regulation’s senior 

management, the Division believes that the Exchanges should not 

allow such deliberations to interfere with the prompt resolution of 

disciplinary matters.

Recommendation

The Exchanges should take 

appropriate measures to ensure 

that internal deliberations do not 

interfere with the prompt 

resolution of disciplinary matters.

§ 38.702 Disciplinary Panels

A designated contract market must 

establish one or more disciplinary 

panels that are authorized to fulfill 

their obligations under the rules of 

this subpart. Disciplinary panels must 

meet the composition requirements of 

part 40 of this chapter, and must not 

include any members of the 

designated contract market's 

compliance staff or any person 

involved in adjudicating any other 

stage of the same proceeding.

Each of the Exchanges maintains two disciplinary panels, a 

Probable Cause Committee (“PCC”) and a Business Conduct 

Committee (“BCC”). The PCC receives and reviews investigation 

reports prepared by Market Regulation and determines whether 

there is a reasonable basis for finding that a violation of exchange 

rules may have occurred which warrants the issuance of charges. 

The BCC is responsible for conducting settlement hearings and 

contested hearings based on charges issued by the PCC. Each 

committee is composed of five people: a panel chair, two exchange 

members (or employees of exchange member firms), and two nonmembers.

 

None

§ 38.703 Notice of Charges 

If compliance staff authorized by a 

The Division found that the notice of charges issued during the 

target period adequately provided the elements required by 

None

 

14 The four cases that resulted in the deficiency finding all involved staff-related delay that occurred after the effective date of the new DCM regulations. The 

Division notes that an additional 11 cases were also delayed due to an insufficiently staffed Enforcement Group. These cases were not included in the deficiency 

finding only because the staff-related delay occurred before the effective date of the New DCM Regulations. 
10

designated contract market or a 

designated contract market 

disciplinary panel determines that a 

reasonable basis exists for finding a 

violation and that adjudication is 

warranted, it must direct that the 

person or entity alleged to have 

committed the violation be served 

with a notice of charges and must 

proceed in accordance with the rules 

of this section. A notice of charges 

must adequately state the acts, 

conduct, or practices in which the 

respondent is alleged to have 

engaged; state the rule, or rules, 

alleged to have been violated (or 

about to be violated); and prescribe 

the period within which a hearing on 

the charges may be requested. The 

notice must also advise that the 

charged respondent is entitled, upon 

request, to a hearing on the charges.

Commission regulation § 38.703. If a PCC Panel decides to issue 

charges, it directs the Enforcement Group to issue a notice of 

charges stating, among other things, the conduct in which the 

respondent is alleged to have engaged as well as the alleged rule 

violations. The notice of charges also advises the respondent that 

the matter will be heard by a BCC Panel and the time and place of 

the hearing.15

§ 38.704 Right to 

Representation

Upon being served with a notice of 

charges, a respondent must have the 

right to be represented by legal 

counsel or any other representative of 

its choosing in all succeeding stages 

of the disciplinary process, except 

any member of the designated 

contract market's board of directors 

or disciplinary panel, any employee 

Notice of charges issued by the Enforcement Group state that the 

respondent has the right to be represented by legal counsel. In 

addition, the Exchanges’ procedures and rules also include 

provisions regarding the respondent’s right to counsel.16

None

 

15 CBOT, CME, COMEX, and NYMEX Rule 407.B.

16 CBOT, CME, COMEX, and NYMEX Rules 407.B and 408.A.
11

of the designated contract market, or 

any person substantially related to the 

underlying investigations, such as 

material witness or respondent.

§ 38.705 Answer to Charges

A respondent must be given a 

reasonable period of time to file an 

answer to a notice of charges. The 

rules of a designated contract market 

governing the requirements and 

timeliness of a respondent's answer to 

charges must be fair, equitable, and 

publicly available.

Notice of charges issued by the Enforcement Group give the 

respondent 21 days to answer the notice. In addition, the answer 

period and procedures governing the respondent’s answer to 

charges are publicly disclosed in the Exchanges’ rulebooks.17

None

§ 38.706 Denial of Charges 

and Right to Hearing

In every instance where a respondent 

has requested a hearing on a charge 

that is denied, or on a sanction set by 

the disciplinary panel, the respondent 

must be given an opportunity for a 

hearing in accordance with the 

requirements of §38.707 of this part.

The Exchanges’ rules provide for a hearing on charges that are 

denied.18 The Division did not identify any instances during the 

target period where a respondent’s request for a hearing was 

denied.

None

§ 38.707 Hearings

(a) A designated contract market 

must adopt rules that provide for the 

following minimum requirements for 

any hearing conducted pursuant to a 

Disciplinary hearings are conducted in accordance with the 

Exchanges’ rules:

• Hearings are held before members of the BCC. No formal 

rules of evidence apply, but hearings are structured and 

must be fair.19

None

 

17 CBOT, CME, COMEX, and NYMEX Rule 407.C.

18 CBOT, CME, COMEX, and NYMEX Rule 407.B and C.

19 CBOT, CME, COMEX, and NYMEX Rule 408.
12

notice of charges:

(1) The hearing must be fair, must be 

conducted before members of the 

disciplinary panel, and must be 

promptly convened after reasonable 

notice to the respondent. The formal 

rules of evidence need not apply; 

nevertheless, the procedures for the 

hearing may not be so informal as to 

deny a fair hearing. No member of 

the disciplinary panel for the matter 

may have a financial, personal, or 

other direct interest in the matter 

under consideration.

(2) In advance of the hearing, the 

respondent must be entitled to 

examine all books, documents, or 

other evidence in the possession or 

under the control of the designated 

contract market. The designated 

contract market may withhold 

documents that are privileged or 

constitute attorney work product, 

documents that were prepared by an 

employee of the designated contract 

market but will not be offered in 

evidence in the disciplinary 

proceedings, documents that may 

disclose a technique or guideline used 

• The respondent may request and review, in advance of the 

hearing, records or other evidence in possession of the 

Exchanges.20

• Enforcement Group staff participates in the hearings and 

presents the case at each hearing.21

• Respondents are entitled to appear personally and may call 

and cross-examine witnesses.22

• The Exchanges maintain rules that require persons within 

their jurisdiction, who are called as witnesses, to participate 

in the hearing and produce any evidence they may have.23

• All hearings are recorded and such recordings may be 

requested by the respondent. If a transcript is requested, the 

respondent is responsible for the cost of producing the 

transcript.24

 

20 CBOT, CME, COMEX, and NYMEX Rule 408.B.

21 CBOT, CME, COMEX, and NYMEX Rule 408.D.

22 CBOT, CME, COMEX, and NYMEX Rule 408.D.

23 CBOT, CME, COMEX, and NYMEX Rules 408.A and 418.

24 CBOT, CME, COMEX, and NYMEX Rule 408.D.
13

in examinations, investigations, or 

enforcements proceedings, and 

documents that disclose the identity 

of a confidential source.

(3) The designated contract market's 

enforcement and compliance staffs 

must be parties to the hearing, and 

the enforcement staff must present 

their case on those charges and 

sanctions that are the subject of the 

hearing.

(4) The respondent must be entitled 

to appear personally at the hearing, 

must be entitled to cross-examine any 

persons appearing as witnesses at the 

hearing, and must be entitled to call 

witnesses and to present such 

evidence as may be relevant to the 

charges.

(5) The designated contract market 

must require persons within its 

jurisdiction who are called as 

witnesses to participate in the hearing 

and to produce evidence. It must 

make reasonable efforts to secure the 

presence of all other persons called as 

witnesses whose testimony would be 

relevant.

(6) If the respondent has requested a 

hearing, a copy of the hearing must 

be made and must become a part of 

the record of the proceeding. The 

record must be one that is capable of 

being accurately transcribed; 

however, it need not be transcribed 

unless the transcript is requested by 
14

Commission staff or the respondent, 

the decision is appealed pursuant to 

the rules of the designated contract 

market, or is reviewed by the 

Commission pursuant to section 8c of 

the Act or part 9 of this chapter. In all 

other instances a summary record of 

a hearing is permitted.

(b) [Reserved]

§ 38.708 Decisions 

Promptly following a hearing 

conducted in accordance with 

§38.707 of this part, the disciplinary 

panel must render a written decision 

based upon the weight of the 

evidence contained in the record of 

the proceeding and must provide a 

copy to the respondent. The decision 

must include:

(a) The notice of charges or a 

summary of the charges;

(b) The answer, if any, or a summary 

of the answer;

(c) A summary of the evidence 

produced at the hearing or, where 

appropriate, incorporation by 

reference of the investigation report;

(d) A statement of findings and 

conclusions with respect to each 

charge, and a complete explanation 

of the evidentiary and other basis for 

such findings and conclusions with 

The Division found that the BCC promptly rendered written 

decisions following hearings during the target period. The Division 

also found that each BCC decision for all four contested and 12 in 

absentia/default hearings during the target period included a 

summary of the charges, any answer by respondent, a summary of 

the evidence produced at the hearing, a statement of findings and an 

explanation regarding the basis for such findings, the specific 

rule(s) violated by the respondent, and a declaration of the 

sanctions imposed against the respondent.
15

respect to each charge;

(e) An indication of each specific rule 

that the respondent was found to have 

violated; and

(f) A declaration of all sanctions 

imposed against the respondent, 

including the basis for such sanctions 

and the effective date of such 

sanctions.

§ 38.709 Final Decisions

Each designated contract market 

must establish rules setting forth 

when a decision rendered pursuant to 

this section will become the final 

decision of such designated contract 

market.

A respondent who is found guilty of an offense or is otherwise 

aggrieved by a decision of or sanction imposed by the BCC may 

appeal to a hearing panel of the Board of Directors within 10 days 

of receiving notice of the decision or sanction, provided that the 

sanction imposed is greater than $10,000 or a five-day suspension. 

In addition, Market Regulation may appeal a BCC decision or 

sanction, or a PCC decision not to issue requested charges, to a 

hearing panel of the Board within 10 days of receiving notice of the 

decision. Board hearing panels consist of a director appointed by 

the Chairman of the Board to serve as chairman of the panel, and 

two additional directors, one of whom must be a non-member.

Appellate Panel decisions are deemed a decision of the Board and

are the final decision of the exchange.25

None

§ 38.710 Disciplinary 

Sanctions 

All disciplinary sanctions imposed by 

a designated contract market or its 

disciplinary panels must be 

commensurate with the violations 

committed and must be clearly 

During the target period, the Exchanges closed 93 disciplinary 

cases (a majority of which were resolved via settlement agreement) 

involving a total of 113 unique respondents. The Division 

reviewed all 93 closed disciplinary cases and found that sanctions 

imposed during the target period were reasonable relative to the 

violations alleged and the evidence presented. In addition, the 

Division found that the Exchanges’ BCC consistently considered 

None

 

25 CBOT, CME, COMEX, and NYMEX Rule 411.
16

sufficient to deter recidivism or 

similar violations by other market 

participants. All disciplinary 

sanctions, including sanctions 

imposed pursuant to an accepted 

settlement offer, must take into 

account the respondent's disciplinary 

history. In the event of demonstrated 

customer harm, any disciplinary 

sanction must also include full 

customer restitution, except where 

the amount of restitution, or to whom 

it should be provided, cannot be 

reasonably determined.

the respondent’s disciplinary history and any customer harm when 

determining sanctions. In the 93 cases closed during the target 

period, the Exchanges assessed a total of $6,301,500 in fines

ranging from $5,000 to $1,000,000.

• CBOT Fines totaled $2,265,000 and ranged from $5,000 -

$1,000,000

• CME Fines totaled $2,021,500 and ranged from $5,000 -

$750,000

• COMEX Fines totaled $210,000 and ranged from $5,000 -

$70,000

• NYMEX Fines totaled $1,555,000 and ranged from $5,000 

- $225,000

In addition, the Exchanges ordered five respondents to pay a total 

of $602,631 in customer restitution; assessed $2,023,900 in 

disgorgement ranging from $6,000 to $1,080,150; issued

suspensions for 51 individuals ranging from five days to 25 years; 

and imposed permanent bars on membership against 10

respondents.

§ 38.711 Warning Letters

Where a rule violation is found to 

have occurred, no more than one 

warning letter may be issued per 

rolling 12-month period for the same

violation.

Market Regulation maintains a warning letter policy prohibiting the 

issuance of more than one warning letter per rolling 12-month 

period for the same violation. Also, to ensure no more than one 

warning letter is issued per rolling 12-month period, Market 

Regulation maintains a list of all warning letters issued since 2010. 

During the target period, the Enforcement Group and the BCC 

issued a total of 16 warning letters. None of the warning letter 

recipients received more than one warning letter during the target 

period for the same violation.

None

§ 38.712 Additional Sources The Division notes that the Exchanges’ rules provide, among other None
17

for Compliance

Applicants and designated contract 

markets may refer to the guidance in 

appendix B of this part to 

demonstrate to the Commission 

compliance with the requirements of 

§38.700 of this part.

things, that:

• Any charge in the notice of charges not denied in whole or 

in part shall be deemed admitted by the BCC.26

• The BCC shall have the authority to take emergency 

actions.27

 

26 CBOT, CME, COMEX, and NYMEX Rule 407.C.

27 CBOT, CME, COMEX, and NYMEX Rule 402.C.