ARTICLE
5 November 2019

CBOT And CME Issue Fines For Trading And Position Limit Violations

CW
Cadwalader, Wickersham & Taft LLP

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Cadwalader, established in 1792, serves a diverse client base, including many of the world's leading financial institutions, funds and corporations. With offices in the United States and Europe, Cadwalader offers legal representation in antitrust, banking, corporate finance, corporate governance, executive compensation, financial restructuring, intellectual property, litigation, mergers and acquisitions, private equity, private wealth, real estate, regulation, securitization, structured finance, tax and white collar defense.
The Chicago Board of Trade Business Conduct and the Chicago Mercantile Exchange Committees fined and suspended multiple traders and companies for various trade practice violations.
United States Finance and Banking

The Chicago Board of Trade Business Conduct and the Chicago Mercantile Exchange Committees (respectively, the "CBOT BCC Panel" and "CME BCC Panel") fined and suspended multiple traders and companies for various trade practice violations.

The CBOT BCC Panel imposed penalties on:

  • two traders $20,000 and $25,000, separately, for entering and canceling (see here and here) orders in soybean futures contracts without planning on trading the orders (a/k/a "spoofing"); and
  • a company $15,000 for conducting an Exchange for Related Position ("EFRP") package transaction that (i) neither had a "reasonable degree" of price correlation nor an opposing market bias and (ii) was not reasonably equivalent to the Exchange component, making the EFRP package non-bona fide.

The CME BCC Panel ordered:

  • a company to pay a fine of $15,000 and disgorge $10,415 for holding a futures equivalent long position that exceeded the spot-month position limit in effect by 19 futures contracts; and
  • a trader to pay a fine of $15,000 for (i) executing trades that were prearranged and noncompetitive, opposite another broker in certain options, and (ii) raising the quantity on a trade but not executing the additional quantity in the market.

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