Stone Ridge Asset Management LLC
CME RULE VIOLATION:
Rule 538.C. Related Position
The related position component of an EFRP must be the cash commodity underlying the Exchange contract or a by-product, a related product or an OTC derivative instrument of such commodity that has a reasonable degree of price correlation to the commodity underlying the Exchange contract. The related position component of an EFRP may not be a futures contract or an option on a futures contract.
Each EFRP requires a bona fide transfer of ownership of the underlying asset between the parties or a bona fide, legally binding contract between the parties consistent with relevant market conventions for the particular related position transaction.
The execution of an EFRP transaction may not be contingent upon the execution of another EFRP or related position transaction between the parties where the transactions result in the offset of the related position without the incurrence of market risk that is material in the context of the related position transactions.
Pursuant to an offer of settlement in which Stone Ridge Asset Management LLC (“SRAM”) neither admitted nor denied the rule violation upon which the penalty is based, on February 21, 2018, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“Panel”) found that on several occasions between January 2016 and June 2016, SRAM executed certain Exchange for Related Position (“EFRP”) transactions in E-mini NASDAQ 100 futures and E-mini S&P 500 futures contracts that were contingent on other transactions that were immediately offset without incurring material market risk. The Panel thus concluded that SRAM thereby violated CME Rule 538.C.
In accordance with the settlement offer, the Panel ordered SRAM to pay a fine of $40,000.
February 23, 2018