• NOTICE OF DISCIPLINARY ACTION

      • #
      • CBOT 15-0271-BC
      • Effective Date
      • 15 December 2016
    • MEMBER FIRM:

      Archer Daniels Midland Company

      CBOT RULE VIOLATIONS:

      Rule 538.C. Related Position

      The related position component of an EFRP must be the cash commodity underlying the Exchange contract or a by-product, a related product or an OTC derivative instrument of such commodity that has a reasonable degree of price correlation to the commodity underlying the Exchange contract. The related position component of an EFRP may not be a futures contract or an option on a futures contract.

      Each EFRP requires a bona fide transfer of ownership of the underlying asset between the parties or a bona fide, legally binding contract between the parties consistent with relevant market conventions for the particular related position transaction.

      The execution of an EFRP transaction may not be contingent upon the execution of another EFRP or related position transaction between the parties where the transactions result in the offset of the related position without the incurrence of market risk that is material in the context of the related position transactions.

      Rule 534 Wash Trades Prohibited

      No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash trades or wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means.

      FINDINGS:

      Pursuant to an offer of settlement in which Archer Daniels Midland Company (“ADM”) neither admitted nor denied the rule violations upon which the penalty is based, on December 13, 2016, a Panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee (“Panel”) found it had jurisdiction over ADM pursuant to Rules 400 and 402 as the conduct occurred while ADM was a CBOT member. The Panel also found that on December 1, 2014, ADM, through two of its subsidiaries, executed two Exchange for Physical (“EFP”) transactions in the Corn Futures market. Each transaction consisted of the simultaneous exchange of futures positions without the exchange of related cash positions, thereby executing non-bona fide EFPs. The Panel further found that ADM executed the transactions for the purpose of transferring positions between ADM subsidiaries, and that ADM maintained ownership and control of the accounts on both sides of the transaction. The Panel concluded that ADM thereby violated CBOT Rules 538.C and 534.

      PENALTY:

      In accordance with the settlement offer, the Panel ordered ADM to pay a fine of $25,000.

      EFFECTIVE DATE:

      December 15, 2016