NOTICE OF DISCIPLINARY ACTION # NYMEX 16-0404-BC Effective Date 01 February 2018 MEMBER: MERRILL LYNCH PIERCE FENNER & SMITH INCORPORATED NYMEX RULE VIOLATIONS: 432. GENERAL OFFENSES (IN PART) It shall be an offense: Q. to commit an act which is detrimental to the interest or welfare of the Exchange or to engage in any conduct which tends to impair the dignity or good name of the Exchange; W. for any party to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange. FINDINGS: Pursuant to an offer of settlement, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) presented at a hearing on January 30, 2018, in which Merrill Lynch neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the New York Mercantile Exchange Business Conduct Committee (“Panel”) found that on December 22, 2015, an automated order routing system operated by Merrill Lynch misrouted an unsupported type of customer order to Globex as a market order instead of rejecting the order. As a result, the execution of that order created a price spike of over 90 ticks in 22 milliseconds but did not result in a trading halt in the Heating Oil spread market. The Panel also found that Merrill Lynch had insufficient procedures or internal controls in place to reject the unsupported customer order type, specifically a custom algorithmic spread order. The failure of Merrill Lynch to have appropriate procedures or controls in place resulted in the execution of a 937-lot order as a market order in an illiquid market, resulting in the 90 tick price spike. The Panel found that as a result, Merrill Lynch violated Rules 432.Q. and 432.W. PENALTY: In accordance with the settlement offer, the Panel ordered Merrill Lynch to pay a fine to the Exchange in the amount of $80,000.