• NOTICE OF DISCIPLINARY ACTION

      • #
      • CBOT-16-0586-BC-1
      • Effective Date
      • 24 December 2018
    • FILE NO.:

      CBOT 16-0586-BC

      MEMBER FIRM:

      Ajax Trading LLC

      CBOT RULE VIOLATIONS:

      Rule 575. Disruptive Practices Prohibited (in part)

      All orders must be entered for the purpose of executing bona fide transactions. Additionally, all non-actionable messages must be entered in good faith for legitimate purposes.

      D.    No person shall enter or cause to be entered an actionable or non-actionable message with intent to disrupt or with reckless disregard forthe adverse impact on, the orderly conduct of trading or the fairexecution of transactions.

      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.

      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.

      FINDINGS:

      Pursuant to an offer of settlement in which Ajax Trading LLC (“Ajax”) neither admitted nor denied the rule violations or factual findings upon which the penalty is based, on December 20, 2018, a Panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee (“Panel”) found that on multiple occasions between September 6, 2016, and November 18, 2016, a trader acting as an agent of Ajax entered multiple orders in various covered user-defined spreads in a manner intended to disrupt or with reckless disregard for the adverse impact on other market participants.

      Specifically, the Panel found that the trader entered orders on both the buy and sell side of an instrument in a manner to be over-allocated futures with a price better than the prevailing outright market and entered orders in a manner to be under-allocated futures with a price worse than the prevailing outright market. As a result, the trader netted $86,093.76 in benefits for the firm.

      The Panel concluded that pursuant to CBOT Rule 433, Ajax is strictly liable for the acts of its agent whose conduct violated CBOT Rule 575.D.

      PENALTY:

      In accordance with the settlement offer, the Panel ordered Ajax to disgorge benefits in the amount of $86,093.76.

      EFFECTIVE DATE:

      December 24, 2018