DRW COMMODITIES, LLC
562. POSITION LIMIT VIOLATIONS
Any positions in excess of those permitted under the rules of the Exchange shall be deemed position limit violations.
Following a full evidentiary hearing on the merits, on April 15, 2014, a Panel of the NYMEX Business Conduct Committee (“Panel”) issued a written decision finding that DRW Commodities, LLC (“DRW”), a NYMEX member, violated NYMEX Rule 562. The Panel found that on June 20, 2011, DRW reached an intraday long position of 3,734 July 2011 Crude Oil (“JUL11 Crude”) contracts, consisting of 2,973 long JUL11 Crude positions executed as Trading at Settlement (“TAS”) transactions and 761 long JUL11 Crude non-TAS positions, which was 734 contracts or 24.5% over the 3,000 lot position limit that was in effect on trade dates June 17, 20, and 21, 2011.
Based on the evidence presented, the Panel found that market participants had fair notice that positions established via TAS were included with non-TAS positions in the same underlying contract for purposes of determining compliance with the Exchange’s position limits. The Panel found that fair notice to market participants was established through, among other things, the placement of TAS Rule 524 in Chapter 5 of the NYMEX Rulebook, the absence of contract specifications or contract chapters identifying TAS transactions as a separate product, and the numerous publicly available communications issued by the Exchange over the years defining TAS as an order type or method of execution that clears as the same product as a non-TAS transaction. The Panel further found that TAS, since its inception, has never been its own independent contract.
Based on the record and the Panel’s findings and conclusions, the Panel ordered DRW to pay a $10,000 fine. The Panel considered a stipulation executed by Market Regulation and DRW that if the Panel found DRW violated Rule 562, then it was agreed that DRW realized profits in the amount of $20,701.40 as a result of the violation. Accordingly, the Panel ordered DRW to disgorge profits in the amount of $20,701.40.
April 30, 2014
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