• NOTICE OF DISCIPLINARY ACTION

      • #
      • CBOT-17-0634-BC-1
      • Effective Date
      • 05 October 2018
    • FILE NO.:

      CBOT 17-0634-BC

      NON-MEMBER FIRM:

      TRC World Group

      CBOT RULE VIOLATIONS:

      Rule 534 Wash Trades Prohibited

      No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash trades or wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means.

      Rule 432 (“General Offenses”) (in relevant part)

      It shall be an offense:

      W. for any party to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange.

      FINDINGS:

      Pursuant to an offer of settlement in which TRC World Group (“TRC”) neither admitted nor denied the rule violation upon which the penalty is based, on October 3, 2018, a Panel of the Chicago Board of Trade Business Conduct Committee (“Panel”) found that on certain dates in August 2016, employees of two subsidiaries of TRC executed transactions in Rough Rice spreads in accounts that TRC controlled where there was common beneficial ownership on both sides of the transactions. TRC executed the opposing buy and sell orders with the knowledge and intent that the orders would trade opposite one another. The purpose of these transactions was to roll the positions forward. The Panel also found that TRC failed to provide compliance training to its employees to ensure their conduct was consistent with Exchange Rules. The Panel concluded that TRC thereby violated CBOT Rules 534 and 432.W.

      PENALTY:

      In accordance with the settlement offer, the Panel ordered TRC to pay a fine of $30,000.

      EFFECTIVE DATE:

      October 5, 2018