UBS Securities LLC
CBOT RULE VIOLATIONS:
Rule 538. A. Nature of an EFRP (LEGACY)
An EFRP consists of two discrete but related simultaneous transactions. One party to the EFRP must be the buyer of (or the holder of the long market exposure associated with) the related position and the seller of the corresponding Exchange contract. The other party to the EFRP must be the seller of (or the holder of the short market exposure associated with) the related position and the buyer of the corresponding Exchange contract.
However, a member firm may facilitate, as principal, the related position on behalf of a customer, provided that the member firm can demonstrate that the related position was passed through to the customer who received the Exchange contract position as part of the EFRP.
Market Regulation Advisory Notice, Exchange for Related Positions, Rule 538, CME Group RA1006-5
Q26: Must transactions executed as EFRPs be reflected as such on customer account statements?
A26: Yes, FCMs must accurately identify EFRP transactions on confirmation and monthly account statements delivered to customers.
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 June 2, 2015, a Panel of the Chicago Board of Trade Business Conduct Committee (“Panel”) found that it has jurisdiction over UBS pursuant to Rules 400 and 402 as the conduct occurred while UBS was a clearing member of the Exchange, and that, on April 3, 2014, UBS executed an Exchange for Related Position (“EFRP”) transaction in the 5-Year U.S. Treasury Note futures contract that was given up for clearing to UBS for a customer. UBS failed to accurately identify the EFRP transaction on the account statements delivered to its customer.
The Panel found that as a result, UBS violated Rule 538.
In accordance with the settlement offer, the Panel ordered UBS to pay a fine of $2,500.
June 4, 2015
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