NOTICE OF DISCIPLINARY ACTION

Chicago Mercantile Exchange Inc.

NOTICE OF DISCIPLINARY ACTION

FILE NO.:                     22-CH-2207

MEMBER FIRM:           Wells Fargo Securities, LLC   

CME Rules:                  930. PERFORMANCE BOND REQUIREMENTS: ACCOUNT HOLDER LEVEL

                                    E. Calls for Performance Bond

1.     Clearing members must issue calls for performance bond that would bring an account up to the initial performance bond requirement: a) when performance bond equity in an account initially falls below the maintenance performance bond requirement; and b) subsequently, when performance bond equity plus existing performance bond calls in an account is less than the maintenance performance bond requirement.

Such calls must be made within one business day after the occurrence of the event giving rise to the call. Clearing members may call for additional performance bond at their discretion. Notwithstanding the foregoing, a clearing member is not required to call for or collect performance bond for day trades.

F. Release of Excess Performance Bond

Subject to exceptions granted by Exchange staff, clearing members may only release performance bond deposits from an account if such deposits are in excess of initial performance bond requirements.

K. Liquidation of Accounts

1.     Non-Security Futures and OTC Derivatives

If an account holder fails to comply with a performance bond call within a reasonable time (the clearing member may deem one hour to be a reasonable time), the clearing member may close out the account holder's trades or sufficient contracts thereof to restore the account holder's account to required performance bond status. Clearing members shall maintain full discretion to determine when and under what circumstances positions in any account shall be liquidated.

FINDINGS:                   Pursuant to an offer of settlement in which Wells Fargo Securities, LLC (“WFS”) consented to entry of findings by the Clearing House Risk Committee (“CHRC”), but neither admitted nor denied the findings or the rule violations upon which the penalty is based, on March 14, 2024, the CHRC found that WFS: (1) contractually agreed for margin calls to be met in a timeframe that was longer than one business day; and (2) contractually agreed to a period of time during which the firm’s full discretion to determine when and under what circumstances positions could be liquidated was restricted. The CHRC thereby concluded that WFS violated CME Rules 930.E.1., 930.F., and 930.K.1.  The CHRC also found that WFS has since amended the relevant customer agreement.

PENALTY:                    In accordance with the settlement offer, the CHRC imposed a $25,000 fine.

EFFECTIVE DATE:       March 15, 2024