TRANSMARKET BULWARK, LLC
RULE 575.D. DISRUPTIVE PRACTICES PROHIBITED
No person shall enter or cause to be entered an actionable or non-actionable message with intent to disrupt, or with reckless disregard for the adverse impact on, the orderly conduct of trading or the fair execution of transactions.
MARKET REGULATION ADVISORY NOTICE DISRUPTIVE PRACTICES PROHIBITED RULE 575 RA1516-5 (IN PART)
Q22: Is the creation or execution of User Defined Spreads (“UDS”) for the purposes of deceiving or disadvantaging other market participants a violation of Rule 575?
A22: Yes. Although the CME Globex system provides certain protections such as reasonability checks with respect to option deltas and the futures price on covered instruments, the UDS functionality requires users to exercise diligence and care in the creation of option spread instruments, including the creation of covered option strategies.
Market participants are reminded that knowingly creating and/or trading UDS instruments in a manner intended to deceive or unfairly disadvantage other market participants is considered a violation of Rule 575.
RULE 576. IDENTIFICATION OF GLOBEX TERMINAL OPERATORS
Each Globex terminal operator shall be identified to the Exchange, in the manner prescribed by the Exchange, and shall be subject to Exchange rules. If user IDs are required to be registered with the Exchange, it is the duty of the clearing member to ensure that registration is current and accurate at all times. Each individual must use a unique user ID to access Globex. In no event may a
person enter an order or permit the entry of an order by an individual using a user ID other than the individual’s own unique user ID.
RULE 433. STRICT LIABILITY FOR THE ACTS OF AGENTS
Pursuant to Section 2(a)(1)(B) of the Commodity Exchange Act, and notwithstanding Rule 432.W., the act, omission, or failure of any official, agent, or other person acting for any party within the scope of his employment or office shall be deemed the act, omission or failure of the party, as well as of the official, agent or other person who committed the act.
Pursuant to an offer of settlement in which TransMarket Bulwark, LLC (“TransMarket”) neither admitted nor denied the rule violations upon which the penalty is based, on November 15, 2018, a Panel of the New York Mercantile Exchange (“NYMEX”) Business Conduct Committee (the “Panel”) found that, on March 28, 2017 and March 29, 2017, a Bulwark trader (“Trader A”), using Tag 50 User IDs registered to other Bulwark employees, executed multiple covered User Defined Spread (“UDS”) transactions related to May 2017 Crude Oil Futures contracts on the Globex electronic trading platform for the purpose of avoiding the allocation of futures contracts that should have been associated with the covered options instrument. As a result of Trader A covering his futures shortfall in the associated outright futures market at more advantageous prices than the futures leg prices of the UDS strategies, Bulwark realized a profit of $18,430. The Panel concluded that, pursuant to Exchange Rule 433, Bulwark is strictly liable for the acts of its employees whose conduct the Panel concluded violated Exchange Rules 575.D. and 576.
In accordance with the settlement offer, the Panel ordered Bulwark to disgorge profits in the amount of $18,430.