CBOT RULE VIOLATION:
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 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.
On August 28, 2018, a Panel of the Chicago Board of Trade (“CBOT”) Probable Cause Committee (“PCC”) charged non-member Benn Hepworth (“Hepworth”) with violating CBOT Rule 534 based on allegations that between October 17, 2016, and October 27, 2016, Hepworth placed buy and sell orders in the same product and expiration months, where he knew or reasonably should have known that the purpose of the orders was to avoid taking a bona fide market position exposed to market risk in the implied EU Wheat spread markets.
On October 29, 2018, a Hearing Panel Chair of the CBOT Business Conduct Committee (“BCC”) entered an order finding that Hepworth failed to answer the charge issued against him. In failing to answer the charge, the Hearing Panel Chair further ordered that Hepworth was deemed to have admitted the charge issued and waived his right to a hearing on the merits of the charges.
Pursuant to CBOT Rule 407.C., a penalty hearing was held before a Panel of the BCC (“Panel”) on December 20, 2018. The Panel found Hepworth guilty of committing the admitted charge.
Based on the record and the Panel’s findings and conclusions, the Panel ordered that Hepworth pay a fine of $50,000. The Panel also suspended Hepworth from all direct and indirect access to any trading floor or electronic trading or clearing platform owned or operated by CME Group Inc. for a period of three years, beginning on the effective date below and continuing for three years from the date that the ordered fine is paid.
January 7, 2019