Notice of Disciplinary Acton

FILE NO.:                     24-CH-2401

MEMBER FIRM:           BNP Paribas Securities Corp.

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

D. Acceptance of Orders

Clearing members may accept orders for an account provided sufficient performance bond is on deposit in the account or is forthcoming within a reasonable time.               

For an account which has been subject to calls for performance bond for an unreasonable time, clearing members may only accept orders that reduce the performance bond requirements of existing positions in the account.

 Clearing members may not accept orders for an account that has been in debit an unreasonable time.

 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.

2.     Clearing members shall only reduce a call for performance bond through the receipt of performance bond deposits permitted under subsection C. of this rule.  Clearing members may cancel a call for performance bond through: a) the receipt of performance bond deposits permitted under subsection C. of this rule only if such deposits equal or exceed the amount of the total performance bond call; or b) inter-day favorable market movements and/or the liquidation of positions only if performance bond equity in the account is equal to or greater than the initial performance bond requirement.  Clearing members shall reduce an account holder’s oldest outstanding performance bond call first.

3.     Clearing members must maintain written records of all performance bond calls issued and satisfied in whole or in part.

F. Release of Excess Performance Bond

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

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:

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4.  Completely and accurately computing and recording the balances in the net capital computation including capital requirements;

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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.

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FINDINGS:                   Pursuant to an offer of settlement in which BNP Paribas Securities Corp. (“BNPPSC”) 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 June 6, 2024, the CHRC found that BNPPSC: (1) allowed an account to trade while undermargined an unreasonable time; (2) improperly issued and deleted performance bond calls; (3) failed to maintain accurate written records for certain performance bond calls; (4) disbursed funds when excess performance bond funds were not available; and (5) improperly computed the segregated and secured 30.7 residual interest requirement calculations. The CHRC thereby concluded that BNPPSC violated CBOT Rules 930.D., 930.E.1., 930.E.2., 930.E.3., 930.F., 970.A.4. and 971.A.  

PENALTY:                    In accordance with the settlement offer, the CHRC imposed a $100,000 fine.

EFFECTIVE DATE:       June 7, 2024