Chicago Board of Trade bans wheat broker for 25 years

Fri Dec 21, 2012 6:18pm EST

* Broker engaged in prohibited prearranged trades

* Transactions occurred from April 2009 to March 2010

* No admittance of guilt as part of settlement deal

CHICAGO, Dec 21 (Reuters) - The Chicago Board of Trade on Friday barred a wheat broker from trading for 25 years for engaging in prohibited transactions.

John Peavy, who worked in the open-outcry pit on the historic CBOT trading floor, broke exchange rules by executing more than 160 "prearranged, round-turn transactions" of wheat futures contracts for his customers from April 2009 to March 2010, according to a disciplinary notice from the exchange.

Wheat prices were often under pressure during that year-long period due to large global supplies.

Peavy could not be reached for comment. He did not admit or deny wrongdoing as part of a settlement with the CBOT.

The prohibited trades were part of a strategy in which Peavy was "illegally offsetting customer orders opposite a single accommodating local trader for that local's personal account," according to the notice.

The second trader, who was not named, made profits for his personal account, it said

CBOT rules state all open-outcry transactions must be made "openly and competitively" and that "no bid or offer shall be specified for acceptance by a particular trader."

The unnamed trader also engaged in prohibited transactions by non-competitively buying and selling identical quantities of the same wheat futures contract opposite Peavy, who was trading for his personal account, according to the notice.

The transactions were often completed at a one-cent price differential, allowing the unnamed trader to be "passing money to Peavy in the form of trading profits," the notice said.

The CBOT is owned by CME Group.

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