• NOTICE OF DISCIPLINARY ACTION

      • #
      • CME-16-0562-BC
      • Effective Date
      • 20 July 2017
    • FILE NO.:

      CME-16-0562-BC

      MEMBER FIRM:

      BARCLAYS BANK PLC

      CME RULE VIOLATION:

      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.

      FINDINGS:

      Pursuant to an offer of settlement in which Barclays Bank PLC (“Barclays”) neither admitted nor denied the rule violation upon which the penalty is based, on [DATE], 2017, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“Panel”) found that on April 5, 2016, Barclays entered into an Exchange for Related Position (“EFRP”) whereby it sold E-mini S&P 500 futures contracts and bought SPDR S&P 500 exchange-traded fund (“SPY”) contracts. Contemporaneous with that transaction, Barclays sold the SPY contracts and bought CBOE June 2016 2000 strike S&P 500 Index (“SPX”) Option Combos opposite the same counterparty. As a result, the related position in the EFRP transaction (the SPY contracts) was established and simultaneously offset without the incurrence of market risk. The Panel further found that the transaction was transitory in nature.

      The Panel concluded that Barclays thereby violated CME Rule 538.C.

      PENALTY:

      In accordance with the settlement offer, the Panel ordered Barclays to pay a fine of $15,000.

      EFFECTIVE DATE:

      July 20, 2017