Tanyard Creek Capital LLC
CME RULE VIOLATIONS:
Rule 562 (“Position Limit Violations”) (in part)
Any positions in excess of those permitted under the rules of the Exchange shall be deemed position limit violations. Additionally, any person making a bid or offer that would, if accepted, cause such person to exceed the applicable position limits shall be in violation of this rule.
On April 9, 2015, an evidentiary hearing was held on the charge that Tanyard Creek Capital LLC (“Tanyard”), a Commodity Trading Advisor (“CTA”), violated CME Rule 562. Tanyard did not dispute the basic facts or liability and, as a result, a Panel of the CME Business Conduct Committee (“Panel”) issued a written decision finding that Tanyard exceeded the spot month speculative position limit of 950 contracts in October 2012 Lean Hog futures contracts (“Lean Hogs”) on October 8, 2012, by 324 contracts long, or 34 percent. The Panel concluded that Tanyard violated CME Rule 562.
The hearing focused on the appropriate monetary fine to be imposed on Tanyard and what amount, if any, of disgorgement as a result of the Rule 562 violation should be ordered. On October 8, 2012, Tanyard came into compliance with the spot month speculative position limit by selling October 2012 Lean Hog futures contracts as part of an October 2012 – December 2012 Lean Hog spread. The Panel found that Tanyard knew on October 5, 2012, that it needed to reduce its Lean Hogs position before the market closed, had ample opportunity to do so, but failed to take the necessary steps to ensure compliance with Exchange Rule 562. Additionally, as a CTA, Tanyard owed duties to its clients to ensure compliance with Exchange rules.
In determining the amount of benefit received by Tanyard as a result of the position limit violation, the Panel considered only the portion of Tanyard’s trading related to the 324 contracts that was in violation of the spot month speculative position limit. The Panel considered the gains received from liquidating this overage, specifically, on the sale of the October 2012 leg of the spread, as well as the losses incurred from the purchases of the December 2012 leg of the spread. Regardless of any obligations Tanyard may have had to its clients to liquidate a greater number of contracts, the Panel found it improper to consider more than the 324 contract overage. Accordingly, the Panel found that Tanyard received a benefit in the amount of $7,128 as a result of violating Rule 562, the amount calculated by Market Regulation.
Based on the record and the Panel’s findings and conclusions, the Panel ordered Tanyard to pay a fine of $25,000 and to disgorge $7,128.
June 29, 2015
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