Deutsche Bank AG
CBOT RULE VIOLATIONS:
534. Wash Trades Prohibited (LEGACY)
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 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.
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.
538. B. Related Positions (LEGACY)
The related position (cash, OTC swap, OTC option, or other OTC derivative) must involve the commodity underlying the Exchange contract, or must be a derivative, by-product, or related product of such commodity that has a reasonable degree of price correlation to the commodity underlying the Exchange contract.
Pursuant to an offer of settlement in which Deutsche Bank AG (“Deutsche”) neither admitted nor denied the rule violations upon which the penalty is based, on March 2, 2016, a Panel of the CBOT Business Conduct Committee (“Panel”) found that it has jurisdiction over Deutsche pursuant to Rules 400 and 402 as the conduct occurred while Deutsche was a member of the Exchange, and that on June 4, 2013, a trader at Deutsche executed two Exchange for Physical (“EFP”) transactions between two accounts with common beneficial ownership. The trader placed the trades in order to move positions between accounts and reasonably should have known that the orders would match opposite one another. The trades should have been effectuated via a back office transfer. The transactions also did not involve related positions and, thus, were not bona fide.
The Panel also found that on August 29, 2013, traders at Deutsche executed two EFP transactions between two accounts with common beneficial ownership. The Deutsche back office mistakenly reported the transactions to the Exchange as EFPs. The transactions also did not involve related positions and, thus, were not bona fide.
The Panel concluded that Deutsche thereby violated legacy CBOT Rules 534, 538.A. and 538.B.
In accordance with the settlement offer, the Panel ordered Deutsche to pay a fine of $60,000.
March 4, 2016
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