DRW INVESTMENTS, LLC
CBOT RULE VIOLATIONS:
538. EXCHANGE OF FUTURES FOR RELATED POSITIONS (Legacy) (In Relevant Part)
12. Parties to any Exchange of Futures for a Related Position (“EFRP”) transaction must maintain all documents relevant to the futures and the cash, swap or OTC transactions, including all documents customarily generated in accordance with cash or other relevant market practices and any documents reflecting payment and transfer of title. Any such documents must be provided to the Exchange upon request and it shall be the responsibility of the carrying clearing firm to provide the requested documentation on a timely basis.
538. EXCHANGE FOR RELATED POSITIONS (Effective September 14, 2009) (In Relevant Part)
H. Parties to any EFRP transaction must maintain all documents relevant to the Exchange contract and the cash, OTC swap, OTC option or other OTC derivative, including all documents customarily generated in accordance with relevant market practices and any documents reflecting payment and transfer of title. Any such documents must be provided to the Exchange upon request, and it shall be the responsibility of the carrying clearing member to provide such requested documentation on a timely basis.
Pursuant to an offer of settlement in which DRW Investments, LLC (“DRW”) neither admitted nor denied the findings upon which the rule violation is based, on May 14, 2014, a panel of the CBOT Business Conduct Committee found that on four occasions in 2008 and 2009, a salesperson at a member firm submitted transactions to the Exchange on behalf of DRW as EFRPs. However, since the subject transactions involved the simultaneous purchase and sale of Treasury futures contracts without any corresponding transaction in a cash or OTC derivative instrument, the trades were not bona fide EFRPs. Although DRW did not direct the salesperson to execute the trades as EFRPs, the member firm nonetheless submitted the transactions to the Exchange as EFRPs, and this caused the transactions to be recorded as EFRPs on DRW account statements. The Panel found that DRW’s failure to detect that the member firm had submitted non bona fide EFRP trades to the Exchange, and its failure to ensure that proper documentation existed for EFRP transactions, violated CBOT Rule 538.
In accordance with the settlement offer, the Panel fined DRW $5,000.
May 16, 2014
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