UNITED STATES OF AMERICA 


Before the 


COMMODITY FUTURES TRADING COMMISSION 

Troy Mertz, 

v. 

CME Group Inc., Market Regulation Department.

CFTC Docket No. 13-E-Ol 

OPINION & ORDER 

Troy Mertz ("Mertz") appeals a final order of the CME Group, Inc. ("CME") disciplining 

him for violating Legacy CME Group Rule 432, which prohibits fraud, bad faith, or conduct 

inconsistent with just and equitable principles of trade. This is the second time this appeal is 

before us. Based on the initial briefs in this matter, it was unclear whether CME provided Mertz 

sufficient notice that his post-closing resolution of certain "outtrades"1 could subject him to 

liability in the pending disciplinary proceeding, and, if not, whether he suffered any prejudice. 

Accordingly, we requested supplemental briefs to clarify those issues. See Mertz v. CME Grp. 

Inc., No. 13-E-01, 2014 WL 495629, at *1 (CFTC Jan. 3, 2014). Both parties filed supplemental 

briefs, and CME requested an opportunity to respond to Mertz's factual claims of prejudice. 

This request was granted. Considering all the facts and circumstances of this case, we conclude 

that although better notice could have been provided, Me1iz received sufficient notice of the 

charges against him. In any event, Mertz has failed to demonstrate that he suffered any prejudice 

1 An "outtrade" is "[a] trade that cannot be cleared by a clearing organization because the trade 

data submitted by the two clearing members or two traders involved in the trade differs in some 

respect (e.g., price and/or quantity)." CFTC Glossary, U.S. Commodity Futures Trading 

Commission, http://www.cftc.gov/consumerprotection/educationcenter/cftcglossary/glossary_o 

(last visited Mar. 7, 2016). 

1 

as a result of the notice he received. In addition, we find that Mertz's remaining claims lack 

merit. We therefore affirm. 

Background 

A. The Flash-Crash Trades 

During the so-called "Flash Crash,"2 which occurred on May 6, 2010, the market for 

options on S&P 500 futures experienced extreme volatility. This appeal concerns two orders 

during that event. The first was a sell order on one thousand September 2010 900 Put Options 

("9/2010 Puts"), and the other a buy order on two thousand nine hundred ninety-five May 2010 

1050 Put Options ("5/2010 Puts"). F-3-4. Both were market orders. F-3-4. Mertz received 

these orders, but did not completely fill either: One lot of two hundred fifty 9/2010 Puts failed to 

clear, as did one lot of one hundred ninety-five 5/2010 Puts. F-3-4. In each instance, the trades 

did not clear because the trader with whom Mertz claimed to have traded, Eric Ganser 

("Ganser") of Citigroup,3 professed ignorance of these trades. F-4. Mertz assigned both lots to 

his error account and offset them the next day. 4 F-4. Because of market volatility, Mertz 

realized significant profits on each transaction: $106,250 from offsetting the 9/2010 Puts and 

$973,900 from offsetting the 5/2010 Puts. F-4. 

2 The "Flash Crash" was "one of the most turbulent periods" in the history of U.S. financial 

markets, characterized by a sharp, sudden collapse of major stock market indices coupled with an 

equally rapid rebound. See generally Andrei Kirilenko, et al., The Flash Crash: The Impact of 

High Frequency Trading on an Electronic Market 1 (May 5, 2014), 

http://www.cftc.gov/idc/ groups/public/@economicanalysis/documents/file/ oce _ flashcrash0314.p 

df; see also E-4; F-3. 

3 Mertz had no trades with Ganser for the 9/2010 Puts, C-10-11; see also E-23-24, but he did 

have two 100-lot trades with Ganser that cleared in the 5/2010 Puts. C-35-38; see also E-40-46, 

E-119-29 (futiher detail on the cleared trades). 

4 All CME floor traders must maintain an error account to which brokerage error trades are 

assigned. See CME Rule 516. 

2 

B. CME Proceedings 

The CME's Market Regulation Department ("Market Regulation") investigated these 

transactions and requested that CME's Probable Cause Committee ("PCC") issue formal 

charges. The PCC determined that Me1iz's actions in handling those orders provided a 

reasonable basis to charge him with several violations of CME rules. Accordingly, the PCC 

issued a 10-page charging memorandum (the "Charging Memorandum"), which described 

Mertz's alleged conduct, including conduct that took place after trading in the pit ceased, and 

charged Mertz with four counts of violating CME rules. The first count charged Mertz with 

violating CME Rule 527.D.1, governing unfilled or underfilled orders. The remaining three 

counts all charged violations of CME Legacy Rule 432.B, a catch-all provision, which prohibits 

fraud, bad faith, or conduct inconsistent with just and equitable trading. 5 The Charging 

Memorandum did not specifically charge Mertz with violating any other CME rules. 

Mertz, represented by counsel, contested those charges at an evidentiary hearing before 

the CME's Business Conduct Committee ("BCC"). Before the BCC, Mertz highlighted the 

chaos on the floor during the Flash Crash and argued that he did not intentionally underfill the 

orders in violation of CME Rule 527.D. Rather, Me1iz maintained that he entered into good faith 

outtrades with Ganser that he properly assigned to his error account pursuant to CME Rule 

527.C. 

5 Count I charged "assigning ... unfilled or underfilled orders into his error account[,]" in 

violation of CME Rule 52 7 .D .1. A-11. Count II charged "failing to execute ... unfilled or 

underfilled orders in the open market" and "improperly assigning the unfilled or underfilled 

orders into [Mertz's] error account," in violation of Legacy CME Rule 432.B." A-11. Count III 

charged "endorsing 250 contracts ofthe [9/2010] Puts into another member with whom he did 

not trade, thereby creating an outtrade," in violation of Legacy CME Rule 432.B. A-11. Count 

IV charged "endorsing 195 contracts of the [5/2010] Puts into a member with whom he did not 

trade that quantity, thereby creating a quantity outtrade with said member," in violation of 

Legacy CME Rule 432.B. A-12. 

3 

The BCC accepted Mertz's defense in part. It found that Market Regulation failed to 

prove by a preponderance of the evidence that Mertz intentionally underfilled the orders in the 

pit during normal trading hours, and therefore found Me1iz not guilty on Counts III and IV. F-6. 

Similarly, the BCC found Mertz not guilty on Count I because Market Regulation did not 

establish that Mertz was "required to address [the] underfills in accordance with CME Rule 

527.D.1." F-6. 6 

However, the BCC concluded that even accepting Mertz' s argument that his failed trades 

with Ganser were outtrades made in good faith, 7 Mertz nonetheless violated CME Rule 432's 

prohibition on fraud, bad faith or conduct inconsistent with just and equitable principles of trade. 

The BCC explained that "[t]he difficulty for Mertz is that, even assuming he is correct that these 

were outtrades, the evidence is clear and uncontrove1ied that [Me1iz] made no effort to comply 

with the requirements of [CME] Rules [527, 527.A,] 527.B and 527.C[,]" wh 8 ich outline a 

trader's responsibility in the event he discovers an outtrade, including after trading in the pit has 

ceased. F-7-8 & n.3. Together, these rules permit the assignment of an outtrade to a member's 

error account only after the member confers with his erstwhile counterparty and (1) reconciles 

any discrepancy in the terms ofthe trade, (2) determines which party will cover the trade, and (3) 

6 Ifthe erroneous trades were unintentional underfills discovered during tradi~g hours, pursuant 

to CME Rule 527.D. l, Mertz was still required upon discovery to fill the trade in the market, 

which he did not do. F-7. Ifthe price received in the market was less favorable to the customer, 

Me1iz was required to make the customer whole, and ifthe price was more favorable, the · 

customer was entitled to the better price. Id. 

7 The BCC credited Mertz's testimony that he only learned he had outtrades with Ganser when 

the two trades did not clear. F-8. 

8 The BCC cited CME Rules 527, 527.A, 527.B, and 527.C to explain in paii why Mertz's 

conduct violated Rule 432.B, the catchall provision. But Me1iz was not charged with violating. 

Rules 527, 527.A, 527.B, or 527.C. Instead, the BCC referenced those rules to reject Mertz's 

defense that the trades at issue were a good faith outtrade, as well as to suggest that Me1iz's 

assignment of the two lots in question to his error account was not done in good faith or 

consistent with just and equitable principles of trade. 

4 

if applicable, apportions the financial results of the outtrade. F-7-8. The BCC explained that 

burdens of complying with CME Rule 527 "are not onerous," and that these rules "serve an 

important function in maintaining the integrity of the markets and in protecting customers and 

members when errors occur in the pit." F-8. In this case, the BCC won-ied that Ganser may 

have claimed some or all of the outtrades, and explained that "Mertz had no right to assume" that 

he could claim all of the trades and their associated profit. F-8-9. It concluded that Mertz' s 

failure to contact Ganser was "inexcusable under any set of circumstances." F-8. The BCC 

found Mertz's conduct especially troubling because Mertz testified that by the time he assigned 

the outtrades to his error account, he knew they were "significantly profitable." F-9. In the 

BCC's view, the profitability of these trades "influenced Mertz's actions," and the BCC 

concluded that if the trades had been losers, Mertz would have contacted Ganser to avail himself 

of the protections of Rule 527. F-9. For these reasons, the BCC held that regardless of whether 

the faulty trades were intentional, Mertz's failure to adhere to the simple, straightforward 

requirements of CME rules after discovering the problem was "the very essence of conduct 

inconsistent with just and equitable principles of trade[,]" in violation of Rule 432.B. F-9. 

After finding that Mertz violated Rule 432.B, the BCC invited further briefing from 

Mertz and Market Regulation on an appropriate sanction. In particular, the BCC reviewed 

"information ... regarding sanctions issued in prior cases that Market Regulation stated were 

comparable to the case at bar and Mertz's prior disciplinary history." F-9. Importantly, Mertz 

"did not contest the evidence submitted by Market Regulation, nor did he submit any 

independent evidence on the issue of profits realized from the two trades at issue." F-9-10. 

Based on the record before it, the BCC ordered that Me1iz disgorge his profits (totaling 

$1,080,150) from the two trades, pay a $100,000 fine, and it suspended Me1iz's trading 

5 

privileges for 3 0 days. F-10. Mertz exhausted his remedies before CME and filed a timely 

appeal to the Commission. 

C. Our Request for Supplemental Briefing 

In an interlocutory decision, we explained that the record raised some questions about 

whether Me1iz received sufficient notice of the charges against him, and, therefore, if the 

proceedings below had been fundamentally fair. Mertz, 2014 WL 495629, at *1-2. We noted, 

however, that even if notice to Mertz had been deficient, relief was only available if Mertz could 

show prejudice. Id. To clarify the record, we solicited supplemental briefing on the questions of 

notice and prejudice. Id. at * 1, *3. Those additional issues are now fully briefed, and the entire 

appeal is ripe for decision. 

Mertz's Arguments on Appeal 

Me1iz challenges the fundamental fairness of the proceedings before the BCC. He 

primarily argues that the proceedings below were unfair because he lacked fair notice of the 

charges against him, in that the Charging Memorandum did not state that the BCC might 

consider whether Mertz violated rules concerning unintentional outtrades. See Troy Me1iz's 

Reg. 9.22 Appeal Br. Pet. to Set Aside Exch. Action, dated Dec. 3, 2012 ("Mertz Br.") at 11-12, 

15; see also id. at 3 (arguing that Me1iz was required "to guess as to how the BCC [would] apply 

the Rules of the Exchange[,]" and expressing incredulity that the BCC would "focus on actions 

that occurred after the market closed").9 Separately, for the first time on appeal, Me1iz raises 

several additional challenges to the fairness of the proceedings before CME. First, Me1iz asse1is 

that the proceedings were unfair because, he claims, CME violated the confidentiality of the 

9 Me1iz' s opening brief lacks page numbers. We excluded the cover page and began numbering 

the pages with the first full page of text to be consistent with how CME treated the pages of 

Me1iz's brief. See Answering Br. of Complainant-Appellee CME Grp. Inc. Mkt. Reg. Dep't, 

dated Feb. 4, 2013 ("CME Br.") at 18 n.9. 

6 
disciplinary process. Id. at 32-33. Me1iz also contends that he was unfairly targeted for 

prosecution and that others similarly situated were not charged. Id. at 13-14, 18-19. Finally, he 

argues that proceedings were unfair because he was not provided with certain video tape 

evidence until close to the hearing and that some ofthat footage was deleted. Id. at 19-20. 

In addition, Mertz raises two evidentiary challenges to the BCC's decision. First, he 

argues that the decision goes against the weight of the evidence, which, he claims, does not 

support a finding of any violations against him. E.g., id. at 8-10, 21-28. Second, Mertz claims 

that the verdict is internally inconsistent. He argues that he could not have been found guilty of 

violating Rule 432's prohibition on conduct inconsistent with just and equitable principles of 

trade charged in Count II, when he was found not guilty of Count I, which charged an improper 

endorsement of the disputed trades to his error account in violation of CME Rule 527.D.1. 

Similarly, he argues that the BCC verdict as to Counts III and IV, charging the intentional 

creation of outtrades in violation of CME Rule 432, indicated that he did not violate that rule in 

any respect. See, e.g., id. at 2-3, 5-6. 

Standard of Review 

The Commission reviews exchange decisions pursuant to Part 9 of its rules. Under 17 

C.F.R. § 9.33(c), the Commission must ensure that "[f]undamental fairness was observed in the 

conduct of the proceeding[,]" id. § 9.33(c)(2), and that there was substantial evidence of a 

violation of the exchange's rules, id. § 9.33(c)(3)(i). The Commission has explained that 

fundamental fairness requires a fair trial before a fair tribunal. See Laken v. Chicago Mercantile 

Exch., [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) ii 24,968, at 37,535, No. 88-E-2, 

1990 WL 294183, at *8 (CFTC Dec. 7, 1990); see also Piccolo v. CFTC, 388 F.3d 387, 391 (2d 

Cir. 2004). To meet that standard, among other things, the exchange must give fair notice ofthe 

7 

matters at issue. Giarritano v. Chicago Mercantile Exch., [1990-1992 Transfer Binder] Comm. 

Fut. L. Rep. (CCH) ~ 25,132, at 38,250, No. 88-E-10, 1991WL192568, at *3 & n.8 (CFTC 


Sept. 25, 1991); Piccolo, 388 F.3d at 391. Relief is only available if an appellant can show 


prejudice. See Jaunich v. Minneapolis Grain Exch., [1992-1994 Transfer Binder] Comm. Fut. L. 


Rep. (CCH) ~ 25,597, at 39,865, No. 91-E-8, 1992 WL 309004, at *3 n.9 (CFTC Oct. 16, 1992); 


see also generally MBH Commodity Advisors, Inc. v. CFTC, 250 F.3d 1052, 1064 (7th Cir. 


2001). 


The Commission reviews an exchange's factual findings for "substantial evidence." In re 

First Commodity Corp. ofBoston, [1986-1987 Transfer Binder] Comm. Fut. L. Rep. (CCH) ~ 

23,694, at 33,800, Nos. 86-E-4, 86-E-5, 1987 WL 106851, at *8 (CFTC May 29, 1987). In 

determining whether substantial evidence suppo1is an exchange action, the Commission does not 

reweigh the evidence. Jaunich, 1992 WL 309004, at *3. Instead, the Commission asks whether 

the record reflects "such evidence as a reasonable mind might accept as adequate to support a 

conclusion." In re First Commodity Corp., 1987 WL 106851, at *8 (citation and internal 

quotations omitted); accord In re Clark & Auciello, Nos. 96-E-1, 96-E-2, 1998 WL 422570, at 

*10 (CFTC July 22, 1998); see also Dickinson v. Zurko, 527 U.S. 150, 162 (1999). 

Discussion 

A. Fundamental Fairness 

Mertz raises a number of arguments challenging the fundamental fairness of the 

proceedings of the BCC. The notice issue presents a close question. Clearly notice would have 

been better had the Charging Memorandum stated that, in.the alternative, Me1iz violated rules 

related to unintentional outtrades. Ultimately, however, we conclude that BCC's decision to find 

a violation of CME Rule 432.B on that basis did not render the proceedings fundamentally unfair 

' 

8 

and, in any event, even if the notice was deficient, Me1iz failed to demonstrate any prejudice. 

Mertz's other claims of unfairness lack any merit. 

Notice. Mertz argues that because Market Regulation consistently framed the trades as 

intentional underfills that violated CME Rules 432.B and 527, including in the Charging 

Memorandum, he had inadequate notice of the possibility that the BCC might (and ultimately 

did) find violations based on unintentional outtrades. Indeed, much of the evidence before the 

BCC focused on whether the trades at issue were intentional underfills. See F-6-7. CME argues 

that Mertz nevertheless had adequate notice because the factual paragraphs ofthe Charging 

Memorandum mentioned Mertz's actions after the close of trading on May 6. CME Br. at 23-24 

(citing A-5-8, 10); Suppl. Br. of Complainant-Appellee CME Grp. Inc. Mkt. Reg. Dep't, dated 

Mar. 5, 2014 ("CME Suppl. Br.") at 2-3. In that context, as CME notes, Me1iz himself injected 

the issue of outtrades, arguing that these trades should be treated as such because they were made 

and resolved in good faith. CME further points out that in making his case to the BCC, Mertz 

specifically referenced Rule 527.C, which concerns outtrades. CME Br. at 17, 25, 27-28; E-7­

11. 

d 

Commission rules require exchanges to furnish their members with notice of pending 

disciplinary charges. See 17 C.F.R. § 8.11 (2010). 10 The notice must, among other things, state 

the "acts, practices, or conduct in which the person is alleged to have engaged[,]" id. § 8.1 l(a), 

and "state the rule alleged to have been violated[,]" id. § 8 .11 (b). But the notice requirement in 

administrative proceedings is lower than other cases, Flying Food Grp. Inc. v. NLRB, 471 F.3d 

178, 183 (D.C. Cir. 2006), and is relatively easy to satisfy, Giarritano, 1991 WL 192568, at *3 

10 Part 8 of the Commission's rules was removed and reserved after the BCC decided this matter. 

See 77 Fed. Reg. 66288, 66304 (Nov. 2, 2012). Current Commission Rule 38.703 continues to 

maintain the same requirements. 17 C.F.R. § 38.703 (2015). 

9 

& n.8; Katz v. SEC, 647 F.3d 1156, 1161-62 (D.C. Cir. 2011). Deficiencies in notice can be 

cured during the course of litigation, including during the conduct of the hearing. See 

Abercrombie v. Clarke, 920 F.2d 1351, 1360 (7th Cir. 1991) ("Administrative pleadings not only 

may be amended prior to a hearing but also may be clarified during a hearing.") (citing Swift & 

Co. v. US., 393 F.2d 247, 252 (7th Cir. 1968)); Perez v. Lorraine Ente1prises, Inc., 769 F.3d 23, 

28-29 (1st Cir. 2014); Clawson v. SEC, No. 03-73199, 2005 WL 2174637, at *l (9th Cir. Sept. 8, 

2005) (unpublished decision) (citing Cal. Dep 't ofEduc. v. Bennett, 864 F.2d 655, 659 (9th Cir. 

1988)). 

The notice supplied by the Charging Memorandum in this case was imperfect as to the 

possibility of charges based on outtrades. On balance, however, we cahnot agree with Mertz that 

the process here was fundamentally unfair. CME is correct that the charging document makes 

clear that the BCC was going to examine the facts concerning the assignment of the relevant 

trades, and that Mertz could be liable if he acted fraudulently, in bad faith, or inconsistently with 

just and equitable principles of trade in violation of Rule 432.B. Once Mertz himself argued that 

the trades were unintentional outtrades, it was predictable and appropriate for the BCC to look to 

his compliance with the relevant outtrade rules to see if Me1iz' s version of the facts would 

neve1iheless constitute a violation of Rule 432.B, which he was charged with violating, in Count 

II. In any event, as explained below, Me1iz was not prejudiced by BCC's deviation from the 

gravamen of the Charging Memorandum. We base this conclusion in part on Me1iz's actions in 

presenting his defense, some of which also provide objective evidence that Me1iz was fairly on 

notice. 

Prejudice. Our precedents require a showing of prejudice before relief can be granted 

in most instances, In re Clark & Auciello, 1998 WL 422570, at *11-12; Daiwa Sec. Am., Inc. v. 

10 

Chicago Bd. ofTrade, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) ~ 26,103, at 

41,648-49, No. 93-E-4, 1994 WL 249800, at *5 & n.11 (CFTC June 9, 1994); Jaunich, 1992 WL 

309004, at *3 n.9, and we see no reason to create an exception here, even assuming Mertz had 

established that the notice was deficient. Indeed, federal courts will not disturb administrative 

proceedings on notice grounds unless there is evidence "a party is misled by an administrative 

complaint, resulting in 'prejudicial error[.]"' Abercrombie, 920 F.2d at 1360 (quoting L.G. 

Balfour Co. v. FTC, 442 F.2d 1, 19 (7th Cir. 1971)); St. Anthony Hosp. v. US. Dept. Health and 

Human Servs., 309 F.3d 680, 708 (10th Cir. 2002); see also generally MBH Commodity 

Advisors, Inc., 250 F.3d at 1064. Despite the opportunity for supplemental briefing, Mertz has 

failed to make the requisite showing. 

Mertz first argues as to the 5/2010 Puts that, with better notice, during the hearing he 

would have focused on a meeting of himself and Ganser, along with Jake Zsuppon ("Zsuppon") 

and Pat Carrey ("Carrey"), their respective trade checkers, and called Zsuppon and Carrey as 

witnesses. Troy Mertz's Suppl. Br. as Ordered by CFTC Unfair Notice and Prejudice, dated 

Mar. 5, 2014 ("Mertz Suppl. Br.") at 1-2. Mertz contends that this meeting was an effoti to . 

resolve his outtrades, fulfilling the requirements of CME Rule 527.C. Id. at 3. According to 

Mertz, Ganser agreed at the meeting to take on 100 additional lots, leaving Me1iz with 195 lots. 

Me1iz's argument fails, however, because both Mertz and CME addressed this meeting 

during the BCC hearing. Both Mertz and Ganser testified about the meeting, and Mertz 

presented video evidence of the event. E.g., E-123-24, E-127-33, E-154, E-245-47, E-273-78, E280-83; see also Mertz Suppl. Br. at 1. Ganser testified that he had no recollection of agreeing to 

apportion a 195 (or 200) lot outtrade with Me1iz during either the 2:29 pm meeting or another 

conversation with Mertz after trading ceased in the pit. E-133-37, E-153-54. Instead, Ganser 

11 

testified that he recalled trading 200 lots of the 5/2010 Puts in total: he traded 100 right away and 

sought a balance trade for all remaining lots, which eventually was confirmed as another 100 

lots. Ganser believed this second 100 lots represented the remaining lots that Metiz had yet to 

trade..E-123-24, E-127-33. Ganser testified he was prepared to accept a considerably larger 

balance trade and acknowledged that he was bound to do so regardless of losses he could incur. 11 

E-130-32, E-265. By contrast, Metiz was equivocal before the BCC, testifying that he "can't be 

certain" that he and Ganser discussed or resolved any quantity discrepancy at the 2:29 pm 

meeting. E-245-47. Mertz also testified that he did not remember what was said in the 2:29 

meeting, id., and later testified that he did not realize he had an outtrade with Ganser or make an 

assignment to his error account until after the pit had closed. E.g., E-251 ("I still hadn't assigned 

anything at ... close [of trading.]"), E-248, E-253, E-276-78. After considering this and other 

evidence, the BCC rejected Mertz's version of events as not credible and inconsistent with his 

own testimony. F-8 & n.3. 12 With respect to the prospect of calling Zsuppon or Carrey as 

witnesses, Mertz has not proffered any indication (much less any evidence) of what testimony he 

would have elicited. 13 Accordingly, there is no indication that Metiz would have actually 

11 By the time of the 2:29 meeting, Ganser testified that as a result of market volatility, the trade 

opposite Mertz for the 5/2010 Puts was profitable and he had "tons ofroom" before he would 

incur a loss. E-130. 

12 On appeal, Mertz continues to n;iaintain that that he did not assign any outtrades to his error 

account until well after closing because he was unsure of whether such outtrades occu,rred. See, 

e.g., Mertz Br. at 11, 17. Mertz's supplemental briefs add little new or different information, and 

fall well shoti of the threshold necessary to persuade us that the BCC would reach a different 

outcome. 

13 In fact, BCC panel members expressed an interest in hearing from Zsuppon, but Mertz failed 

to confer with his own clerk during the pendency of the investigation, E-297-98. Instead, Metiz 

became standoffish when BCC panel members specifically inquired about Zsuppon's testimony, 

which was relevant to his good faith defense below and now appears central to his prejudice 

claim on appeal. See E-216. It is hard to credit Metiz' s claim of prejudice, since the relevance 

of the testimony in question was clear at the time - the finders of fact actually inquired about it ­

12 

adduced different evidence, and even if he did, we have no reason to believe that such evidence 

would persuade the BCC to reach a different outcome, especially given the substantial evidence 

supporting the BCC's factual findings. 

Mertz also fails to show prejudice based on deficient notice as to the 9/2010 Puts. 

Instead, he repeats arguments raised in his opening briefthat 30 seconds of missing videotape 

deprived him of evidence he could use to impeach Ganser. Mertz Suppl. Br. at 4-5. As 

explained more fully below, Mertz waived these arguments by not preserving them before the 

BCC, and Mertz suffered no prejudice because other video angles depicting the same time were 

available and they provided ample basis to support the BCC's factual findings. 

More generally, Mertz argues that had he known his good faith and/or compliance with 

Rule 527.C was in issue below, he would have presented additional evidence attesting to his 

presence on the trading floor long after the close, his attempts to confer with Ganser during 

trading hours, and the improbability of Ganser' s testimony. Id. at 6-7. 14 This is a difficult 

position to take as Mertz had every incentive to put on such evidence in the first place, since it 

was Me1iz himself who put his good faith in issue. In fact, Mertz did offer such evidence, as did 

Market Regulation. Compare Mertz Suppl. Br. at 1-2, with E-245-47. For example, in addition 

to the specifics discussed above, Mertz presented evidence of his presence on the floor after the 

close, along with his post-closing consultations with Ganser and his clearing member. E.g., E171, E-174, E-178, E-247-50, E-273-74. Market Regulation introduced evidence from Ganser 

that he was not aware of any trade with Mertz involving the 9/2010 Puts until Market Regulation 

and he, while represented by counsel, did not object to these questions, or seek a continuance to 

protect his rights and obtain testimony from Zsuppon. 

14 In addition, Mertz claims that he would use transcripts of previous Market Regulation 

interviews with Ganser to refresh his recollection regarding the meeting. The problem for Mertz 

is that he did in fact refer to these transcripts before the BCC, see, e.g., E-203-04, and they did 

not persuade the BCC to doubt Ganser's testimony. Me1iz therefore suffered no prejudice. 

13 
brought this trade to his attention. E-122. The evidence was similar for the disputed 195 lot of 

the 5/2010 Puts. E-134-35. Ganser testified that he would have traded opposite Me1iz for that 

lot, ifhe had been aware of it. E-127-34. Mertz also argues that with proper notice, he would 

have introduced video evidence that he discussed outtrades with Ganser's clerks after the close. 

Me1iz Suppl. Br. at 6. But some such video was introduced into evidence. E-153. To the extent 

Me1iz alludes to additional video, he fails to show that such video exists or describe what the 

video would depict and how it would contradict the other evidence before the BCC. 

Thus, despite the opportunity for supplemental briefing, Mertz has proffered little in the 

way of additional or different evidence or even that he would have conducted a materially 

different cross examination. See Mertz, 2014 WL 495629, at *3. What little he did put forward 

falls short of a credible claim that the outcome before the BCC would have been different. 

Accordingly, Mertz's notice claim fails. 

Confidentiality. Mertz claims that Market Regulation violated the confidentiality of the 

disciplinary process. Me1iz Br. at 32-33. He claims that he first learned of a possible action 

against him in an email from a third paiiy. See Mertz Br. Ex B (the email). CME notes that this 

email is not paii of the record below, which ordinarily precludes its consideration on appeal. See 

In re Clark & Auciello, 1998 WL 422570, at *13 (matter not raised before exchange was 

waived); 17 C.F.R. §9.30 (noting that Commission can treat issues as waived). Moreover, as 

, 	 CME points out, there is no indication of (and it is difficult to conceive of) prejudice from this 

alleged breach, which would be required to reverse an exchange's disciplinary order. See 

Jaunich, 1992 WL 309004, at *3 n.9; MBH Commodity Advisors, Inc., 250 F.3d at 1064 .. 

Accordingly, Me1iz's confidentiality claim lacks merit. 

14 

Differential Treatment of Mertz and Ganser/Citigroup. Mertz argues that the 

proceedings were flawed and unfair because Ganser and Citigroup acted similarly to Mertz, but 

were not charged. E.g., Mertz Br. at 13-16; 18-19. CME notes that this claim was not raised 

below, and argues that it should be treated as waived. See In re Clark & Auciello, 1998 WL 

422570, at *13. We agree. In any event, the argument is unavailing as a factual matter because 

the BCC's decision contains no indication that Ganser or Citigroup violated any CME Rules. 15 

The Video Tapes. Me1iz argues that proceedings were unfair because, although some 

video tapes depicting trading on the floor during the relevant times were made available to him 

early in the process, other tapes depicting the same activity from different cameras at different 

angles were not made available until the day before the hearing. Me1iz Br. at 19-20. CME 

responds that because of the extraordinary events of the Flash Crash, standard video deletion 

policies were not followed and video from additional cameras was in fact preserved. CME Br. at 

30. CME states that Market Regulation only became aware of that additional video depicting the 

trades at issue five days before the hearing and that it notified Mertz and his attorney of the 

video's existence that same day. Id. at 30-31. 

CME argues that this issue is waived because Me1iz, then represented by counsel, did not 

raise it below. Me1iz has not suggested that he preserved the issue for review. Accordingly, it is 

waived. See In re Clark & Auciello, 1998 WL 422570, at *13. In any event, Mertz has not made 

a convincing case of prejudice: CME primarily relied on video that it did produce months before 

the hearing, and Mertz, for his part, actually utilized the later-provided video during the BCC 

hearing. See CME Br. at 31-32; see also Mertz Br. at 8-11. We therefore reject this claim. 

15 In fact, the BCC concluded that Ganser and Citigroup were not similarly situated because 

Mertz failed to inform Ganser about the failed trades or to seek to apportion the results of those 

trades. That factual finding, which, as described below (see infra at pages 17-18) is supported by 

substantial evidence, disposes of Mertz' s claim of disparate treatment. 

15 

Mertz also argues that Market Regulation intentionally deleted a portion of the videotape 

that would be helpful to his defense. Me1iz Br. at 29; see also Mertz Suppl. Br. at 4-7. 

However, he points to no evidence suggesting an intentional deletion, nor did he raise such a 

claim below. CME agrees that there is a "30-second skip on one of the video angles ... during 

the filling ofthe Sept 10 900 Puts," but maintains that this skip was "due to a glitch in the 

. technology ...." CME Br. at 31. CME argues that this glitch was harmless because "several 

more angles showed the exact time period," and the BCC concluded that the video blackout was 

not relevant. CME is correct that Me1iz did not raise this issue below, and it is therefore waived. 

See In re Clark & Auciello, 1998 WL 422570, at * 13. In any event, CME largely relied on 

another video that covered the entire time period, which cured any possible prejudice. Jaunich, 

1992 WL 309004, at *3 n.9; MBH Commodity Advisors, Inc., 250 F.3d at 1064. We therefore 

reject this claim both because it is waived and because Mertz has not adduced any evidence of 

prejudice or spoliation on the part of CME. 

In sum, we conclude, based on the whole record, that the proceedings below satisfied 1 7 

C.F.R. § 9.33(c)(2) because Me1iz received a fair hearing before a fair tribunal. . 

B. Sufficiency of the Evidence 

Me1iz mounts two challenges to the evidence supporting the BCC's decision. He first 

argues that the BCC's decision goes against the weight of the evidence. He also argues that the 

BCC' s decision is internally inconsistent. We disagree in both respects. 

Evidentiary Sufficiency. Among other things, Mertz argues that the BCC 

mischaracterized testimony, improperly credited Ganser's ~estimony over his own, and drew 

umeasonable factual conclusions and inferences. We see no basis to overturn the BCC's factual 

findings or its decision to credit Ganser's testimony, paiiicularly under the deferential standard 

16 

ofreview, In re First Commodity Corp., 1987 WL 106851, at *8; accord Dickinson, 527 U.S. at 

162, which is heightened with respect to credibility determinations, Baker v. Dain Bosworth, 

Inc., [1984-1986 Transfer Binder] Comm. Fut. L. Rep. (CCH) ~ 22,752, at 31,129, 1985 WL 

55280, at * 1 (CFTC Sept. 30, 1985). 

The BCC's resolution of the disputed issues of fact is supported by evidence in the record 

that a reasonable mind could rationally accept to draw conclusions adverse to Mertz, thus 

satisfying the deferential standard of review. In re First Commodity Corp., 1987 WL 106851, at 

*8. 16 For example, Ganser testified that he first learned that he had outtrades with Mertz only 

when he was interviewed by Market Regulation. E-118 (9/2010 Puts); E-134-35 (5/2010 Puts). 

By contrast, Mertz now maintains that he and Ganser resolved quantity issues with respect to the 

5/2010 Puts either around 2:29 pm or alternatively after the close, even though his testimony 

before the BCC was more equivocal. See E-245-47. And Mertz conceded below that he did not 

contact Ganser and offer him an opportunity to cover the 195 lot outtrade on the 5/2010 Puts, 

which were profitable, which suggests Ganser's testimony was credible. See, e.g., E-305; see 

also E-137 (Ganser testifying that Me1iz did not offer the 195 lots of 5/2010 Puts). Nonetheless, 

Mertz suggested that he would have asked that Ganser cover this outtrade if faced with a loss. 

E.g., E-298-300. Ganser, however, maintained that, as to the 5/2010 Puts, he would have traded 

the remaining balance of the order, regardless of whether it was profitable. E-123-24, E-127­

32.17 (Ganser consistently maintained that he never traded the 9/2010 Puts with Me1iz.) In sum, 

16 As CME correctly points out, many of the key facts in this case, such as the identity of the 

traders, the size of the outtrades, Mertz's profits, and the reason the two disputed trades did not 

clear, were undisputed. CME Br. at 15-16. 

17 Mertz now suggests that the BCC should not have accepted Ganser's testimony regarding a 

balance trade because Ganser was subject to risk limits on his trading that would have prevented 

him from trading the full 400 lots of 5/2010 Puts. Mertz Br. at 13. Mertz did not make this 

argument below, and it is therefore waived. See In re Clark & Auciello, 1998 WL 422570, at 

17 

based on the whole record, we are satisfied that the BCC's factual determinations of contested 

questions, such as whether Mertz made any attempt to contact Ganser or otherwise reconcile the 

trades, the consistency and credibility of Ganser's testimony, and the possibility of a windfall, 18 

are supported by substantial evidence. No more is required under the applicable standard of 

review. 

BCC's Consistency. Me1iz argues that the BCC's not guilty finding as to Count I 

(improper assignment violating Rule 527.D) necessarily meant that the assignment was valid. If 

the assignment was valid, Mertz argues, the guilty finding on Count II, which was based on the 

assignment ofthe trades to his error account in bad faith or inconsistent with just and equitable 

principles of trade, is insupportable. See Mertz Br. at 3, 5, 25. 

Mertz's argument lacks merit because its premise is flawed-the BCC did not find that 

the assignment was valid. Rather, the BCC's not guilty finding as to Counts I, III, and IV merely 

established that Mertz did not intentionally underfill the orders in question during trading hours 

to obtain a windfall profit in violation of Rules 432 or 527.D. The BCC was clear that even if 

the trades were unintentional outtrades when they were first recorded in the trading pit, Mertz 

lacked good faith in his handling of those trades once trading in the pit ceased and the outtrade 

was discovered. The BCC's guilty finding on Count II rests on the conclusion that in failing to 

follow appropriate procedures to determine how the outtrades would be covered and how 

financial responsibility - in this case a significant profit - would be appo1iioned once they were 

*13. Iti any event, the record does not support this claim. Although Ganser did testify that he 

was subject to risk limits, E-148, he indicated that he would have had approval from his risk 

manager to do the balance trade, E-15 3. 

18 Mertz' s counsel conceded that the 195 lot outtrade of 5/2010 Puts was consistently profitable, 

see E-10, and indeed it accounts for the majority ofthe profit Mertz was ordered to disgorge. 

See supra at page 2 

18 
discovered, Mertz did not act in good faith or consistently with just and equitable principles of 

trade. As such, there is no inconsistency in the BCC's verdict. 

Conclusion 

For the foregoing reasons, the BCC's verdict is affirmed. 

IT IS SO ORDERED. 

By the Commission (Chairman MASSAD and Commissioners, BOWEN, and 

GIANCARLO.) 

Christoplier J. } rkpatrick 

Secretary of the Commission 

Commodity Futures Trading Commission 

Dated: May 9, 2016 

19