• NOTICE OF DISCIPLINARY ACTION

      • #
      • CME 12-8850-BC
      • Effective Date
      • 27 November 2013
    • FILE NO.: CME 12-8850-BC

       

      NON-MEMBER: KOCH PULP & PAPER TRADING, LLC

       

      CME RULE VIOLATION:

      538. EXCHANGE FOR RELATED POSITIONS (in part)

      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.

       

      FINDINGS:

      Pursuant to an offer of settlement in which Koch Pulp & Paper Trading, LLC (“KPPT”) neither admitted nor denied the rule violation upon which the penalty is based, and after voluntarily submitting itself to the jurisdiction of the Exchange for purposes of resolving the matter, on November 25, 2013, a Panel of the CME Business Conduct Committee (“Panel”) found that on February 3, 2012, KPPT executed an Exchange for Risk (“EFR”) transaction in the November 2012 Lumber futures market that consisted of an exchange of a futures contract without an exchange of a corresponding OTC swap or other OTC instrument. The Panel concluded that KPPT thereby violated CME Rule 538.A.

       

      PENALTY:

      In accordance with the settlement offer, the Panel ordered KPPT to pay a fine of $15,000.

       

      EFFECTIVE DATE:

      November 27, 2013