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February 12, 2013

Appeal of Exchange Disciplinary Action Dismissed as Premature

By Lene Powell, J.D.

The CFTC dismissed an appeal of a decision by an appellate panel of the board of directors of the CME Group (NYMEX) that vacated an accepted settlement agreement. The Commission determined that the appeal was premature and that the decision was not reviewable under CFTC Rule 9.1(a) (Iocolano v. CME Group, et al., February 11, 2013).

In November 2009, the exchange's Probable Cause Committee charged that, from May through July 2008, respondents had violated various NYMEX rules in an alleged scheme to allocate crude oil options and evade margin requirements. Respondents asserted the affirmative defense that the procedural rules used in the proceeding differed from the NYMEX procedural rules in effect at the time of the challenged transactions.

In early 2010, respondents submitted settlement offers to the Business Conduct Committee (BCC). Although the Market Regulation Department did not support the settlements, the BCC accepted the offers and issued a decision. Market Regulation appealed the BCC's decision to the Appellate Panel, which reversed the decision, vacated the settlements, and remanded for further proceedings.

Upon respondents' request for CFTC review of the Appellate Panel's decision, the exchange noted that NYMEX had not yet taken any disciplinary action against respondents, and the only potential adverse action taken against respondents was the decision to reverse the BCC's decision and remand for further proceedings. The Commission agreed that the request for review was premature. The Commission found that the order did not fit into any category of reviewable actions under CFTC Rule 9.1(a) because it was not a disciplinary order, penalty, or access denial action, nor was it the sort of adverse action that would entitle respondents to an immediate appeal. Accordingly, the Commission dismissed the appeal.

The case is No. 11-E-01.

LitigationEnforcement: CommodityFutures Enforcement

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