Michigan Agricultural Commodities, Inc.
CBOT RULE VIOLATIONS: (LEGACY) 538.A. Nature of an EFRP
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.
Pursuant to an offer of settlement in which Michigan Agricultural Commodities, Inc. (“MAC”) neither admitted nor denied the rule violations upon which the penalty is based, on November 4, 2015, a Panel of the Chicago Board of Trade Business Conduct Committee (“Panel or BCC”) found that MAC is subject to the BCC’s jurisdiction pursuant to Rules 402 and 418, and that between September 2012 and September 2013, MAC entered into eight Exchange for Physical (“EFP”) transactions in the Corn, Soybean, and Wheat futures markets that consisted of the simultaneous exchange of futures positions without the exchange of related cash positions, thereby executing non-bona fide EFPs. The purpose of the transactions was to offset positions between two MAC accounts.
The Panel concluded that MAC thereby violated (Legacy) CBOT Rule 538.A.
In accordance with the settlement offer, the Panel ordered MAC to pay a fine of $30,000.
November 6, 2015
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