[ By Howard Haykin ] Business Conduct Committee of the CBOE took disciplinary action in 6 cases against members and associated persons, based on investigations by Exchange staff.  Each respondent settled the Exchange charges, by submitting a Letter of Consent and agreeing to pay a fine.  To access CBOE’s records, click the linked case reference. In the first posting, last Thursday, we dealt with cases involving:  (i) MNR Executions LLC;  (ii) Diligentia Capital, LLC;  and (iii) Jag Trading, LLC and Craig Bauer.  [Thursday WWW posting] (cross-referencing) In our 5/8/12 posting, we deal with cases involving:  (iv) Andrew W. Smyth Jr. and Sparta Group of Chicago, L.P.;  (v) Coastal Trade Securities, L.L.C.;  and, (vi) Maryann Tesinsky. _______________________________ In the Matter of:  Andrew Smyth, Jr., and Sparta Group of Chicago, L.P., File No. 11-0032. The Chicago-based firm, a Trading Permit Holder, approved to conduct business as a market-maker and conduct prop trading,  amd its associated person agreed to settle the following Exchange charges, by submitting a Letter of Consent and agreeing to pay a $50k fine jointly and severally.  In addition, Smyth agreed to a 2-week suspension from holding an Exchange Trading Permit and from association with any Exchange TPH or TPH organization.

A sampling of transactions involving the VIX options series indicated "probable cause for finding" that, from about 3/4/10 through 5/17/10, Smyth caused several market quotations involving the VIX option series to be unduly changed by making the last reported bids and/or offers that did not reflect the true state of the market of those series.  As a result of the above last reported bids and/or offers, the net liquidating equity in Smyth's Market-Maker account was increased.

Additionally, during March, April and may 2010, Sparta failed to adequately supervise its  nominee from allegedly engaging in the violative conduct.

Entering such erroneous last reported bids a/o offers in the VIX option series would constitute a violation of Exchange Rules 4.1,  4.7 and 8.7(a)  by Smyth, and such supervisory deficiencies on the part of Sparta would constitute a violation of Exchange Rules 4.2.

In the Matter of:  Coastal Trade Securities, L.L.C., File No. 11-0030. The New York-based firm was a TPH (Trading Permit Holder) of CBOE Stock Exchange, registered to transact prop trading stock.  During an October 2010 Routine Exam, staffers reviewed Coastal's Insider Trading program and its Reg. SHO compliance practices, and found "probable cause" that Coastal committed the following violations or possessed the following deficiencies for the period on or about October 2010::

• allegedly failed to obtain and review outside brokerage account statements for 283 of 954 accounts disclosed by 77 associated persons (~30%);
• allegedly failed to evidence date of review for personal brokerage account statements that were evidenced to have been reviewed;
• allegedly failed to evidence review of approximately 10 personal brokerage account statements.
• allegedly failed to have an adequate aggregation unit plan, in that the written plan did not meet all of the requirements set forth in Rule 200(f).   Specifically, the aggregation unit plan ID's several traders that were assigned to more than one aggregation unit at a time and there were multiple aggregation units pursuing the same trading strategies or objectives.

Such acts, practices and conduct related to the brokerage accounts would constitute a violation of Exchange Rules 4.2; 4.18; 15.1; Section 15(f) of the Act; and Section 17(a) of the Act and Rules 17a-3 and 17a-4 thereunder. Such acts, practices and conduct related to the aggregation unit plan would constitute a violation of Exchange Rule 4.2; and Regulation SHO of the Act and Rule 200(f) thereunder. Coast Trade Securities agreed to accept a $25K fine to settle CBOE charges ($25,000). In the Matter of:  Maryann Tesinsky, File No. 11-0007. The Associated Person of Electronic Brokerage Systems, LLC ("EBS"), residing in Lemong, IL, was responsible, among other things, for entering Qualified Contingent Trades ("QCT") and was EBS’ supervisor in charge of overseeing EBS’ QCT Crossing Desk.  The firm was a CBOE member firm and, a CBOE Stock Exchange Permit Holder, registered to conduct business as a broker and a clearing member. Based on a sampling of 2,785 QCT Orders, staff members noted "probable cause: to conclude that Tesinsky allegedly failed to record the option component (i.e. quantity, series, exchange ID of the non stock component).  From about November 2009 through May 2010, Tesinsky allegedly failed to execute the stock component of a QCT at or near the same time the related option component time of execution for at least 2,785 QCT orders, as more fully described in Appendix A to the Statement of Charges in File No. 11-0007.  Furthermore, from the approximate period, November 2009 through May 2010, Tesinsky allegedly failed to:

1. properly document numerous order tickets by failing to ID the option component as prescribed by the Exchange, as more fully described in Appendix B to the Statement of Charges in File No. 11-0007.
2. produce documents on a timely basis in response to numerous Exchange requests for such documents, thereby impeding and delaying the Exchange’s investigation.
3. establish and maintain adequate supervisory procedures to ensure that EBS personnel complied with the above conduct.

Such acts, practices and conduct re: the execution of the 2,785 QCT Orders would constitute violations of Exchange Rules 4.1 and 52.7; Regulation NMS under the Act and Rule 611(d) thereunde, as well as Exchange Rule 4.1 and Section 17(a) of the Act and Rule 17a-3 thereunder. Such acts, practices and conduct related to failing to produce documents on a timely basis and failure to maintain adequate supervision, would constitute violations of Exchange Rule 4.2. Tesinsky agreed to pay a $75K fine, to attend and successfully complete an Ethics course acceptable to the Office of Enforcement within 90 days from the issuance of the Decision.