UBS Securities LLC
CBOT RULE VIOLATION:
(Legacy) Rule 526 Block Trades (in part)
A. Orders may not be aggregated in order to achieve the minimum transaction size.
F. The seller must ensure that each block trade is reported to the Exchange within five minutes of the time of execution; except that block trades in interest rate futures and options executed outside of Regular Trading Hours (7:00 a.m. – 4:00 p.m. Central Time, Monday – Friday on regular business days) must be reported within fifteen minutes of the time of execution. The report must include the contract, contract month, price, quantity of the transaction, the respective clearing members, the time of execution, and, for options, strike price, put or call and expiration month. The Exchange shall promptly publish such information separately from the reports of transactions in the regular market.
Rule 536. Recordkeeping Requirements for Pit, Globex, and Negotiated Trades (in part)
A. At the time of execution, every order received from a customer must be in the form of a written or electronic record and include an electronic timestamp reflecting the date and time such order was received on the floor of the Exchange and, except as provided in Section C, must identify the specific account(s) for which the order was placed. Such record shall also include an electronic timestamp reflecting the date and time such order was modified, returned, confirmed or cancelled.
Market Regulation Advisory Notice RA1203-3 Block Trades
5. Block Trade Price Reporting Requirements
b) Reporting Obligation (in part)
The failure to submit timely, accurate and complete block trade reports may subject the party responsible for the reporting obligation to disciplinary action.
Pursuant to an offer of settlement in which UBS Securities LLC (“UBS”) neither admitted nor denied the rule violations upon which the penalty is based, on [hearing date], a panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee found that it had jurisdiction over UBS pursuant to Rules 400 and 402 as the conduct occurred while UBS was a CBOT member, and that on multiple dates between February 17, 2011, and October 5, 2011, UBS executed block trades in various treasury and equity futures contracts and did not report those trades to the Exchange within five minutes of the time of execution. The Panel concluded that UBS thereby violated CBOT Rule 526.F. During this same time period UBS failed to maintain accurate records with respect to multiple block trade executions. The Panel found that in so doing, UBS violated Rule 536.A.
Additionally, the Panel found that on January 13, 2011, UBS priced a block trade in U.S. Treasury Bond futures to Trade at Settlement (“TAS”). The panel concluded that this transaction violated Rule 526 and that no CBOT Rule permitted TAS transactions. The Panel also found that on June 10, 2011, UBS aggregated several orders to achieve the minimum transaction size in a block trade in E-mini MSCI EAFE futures contracts. The panel found that in so doing, UBS violated Rule 526.A.
In accordance with the settlement offer, the Panel ordered UBS Securities LLC to pay a fine of $90,000.
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