• NOTICE OF DISCIPLINARY ACTION

      • #
      • 18-CH-1803
      • Notice Date
      • 29 June 2018
      • Effective Date
      • 29 June 2018
    • FILE NO.:                     18-CH-1803                              

      MEMBER FIRM:           Advantage Futures LLC

      CME RULES:                970.      FINANCIAL REQUIREMENTS

      A.    Subject to exemptions granted by Exchange staff, all clearing members, including non-FCMs, must comply with the requirements set forth in CFTC Regulations 1.10, 1.12, 1.17 and 1.18. This includes, but is not limited to, the following:

      1.   Maintenance of minimum capital requirements of at least $5 million except that a clearing member that is a bank must maintain minimum Tier I Capital (as defined in accordance with regulation applicable to the relevant bank) of at least $5 billion;

      971.      SEGREGATION, SECURED AND CLEARED SWAPS CUSTOMER ACCOUNT REQUIREMENTS

      A.    All clearing members must comply with the requirements set forth in CFTC Regulations 1.20 through 1.30, 1.32, 1.49 and 30.7, and Part 22 of the CFTC Regulations. This includes, but is not limited to, the following:

      1.   Maintaining sufficient funds at all times in segregation, secured 30.7 and Cleared Swaps Customer accounts;

      982.      RISK MANAGEMENT

      All clearing members must have written risk management policies and procedures in place to ensure they are able to perform certain basic risk and operational functions at all times. At a minimum, the following areas must be considered in the firm’s policies and procedures, depending on the firm’s size and its business and product mix:

      A.    Trade Submission and Account Monitoring. Clearing members must have procedures in place to demonstrate compliance in the following areas for trades executed through both electronic platforms and open outcry:

      1.     Monitoring the credit risks of accepting trades, including give-up trades, of specific customers.

      2.    Monitoring the risks associated with proprietary trading.

      3.    Limiting the impact of significant market moves through the use of tools such as stress testing or position limits.  

      4.    Maintaining the ability to monitor account activity on an intraday basis, including overnight.

      5.    Ensuring order entry systems include the ability to set automated credit controls or position limits or requiring a firm employee to enter orders.

      6.    Defining sources of liquidity for increased settlement obligations.

      FINDINGS:                    Pursuant to an offer of settlement in which Advantage Futures LLC neither admitted nor denied the rule violations upon which the penalty is based, on June 28, 2018, the Clearing House Risk Committee found that Advantage Futures LLC violated CME Rules 970.A.1., 971.A.1. and 982.A.

      PENALTY:                    In accordance with the settlement offer, the Clearing House Risk Committee imposed a $100,000 fine.

      EFFECTIVE DATE:       June 29, 2018