NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CBOT 16-0521-BC

NON-MEMBER:

Maria Ortiz y Cia

CBOT RULE VIOLATIONS:

Rule 538.B. Independently Controlled Accounts (LEGACY)

The opposing accounts to an EFRP transaction must be (a) independently controlled accounts with different beneficial ownership; (b) independently controlled accounts of separate legal entities with common beneficial ownership; or (c) independently controlled accounts of the same legal entity, provided that the account controllers operate in separate business units.
For EFRP transactions between accounts with common beneficial ownership, the parties to the trade must be able to demonstrate the independent control of the accounts and that the transaction had economic substance for each party to the trade.

Rule 538.C. Related Position (LEGACY)

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.

Rule 538.F. Prices and Price Increments (LEGACY)

The Exchange component of the EFRP transaction must be priced in accordance with the applicable futures price increments or option premium increments as set forth in the rules governing the Exchange contract.

EFRPs may be transacted at such commercially reasonable prices as are mutually agreed upon by the parties to the transaction. EFRPs may not be priced to facilitate the transfer of funds between parties for any purpose other than as the consequence of legitimate commercial activity.

FINDINGS:

Pursuant to an offer of settlement in which Maria Ortiz y Cia (“MOC”) neither admitted nor denied the rule violations or factual findings upon which the penalty is based, on May 23, 2019, a Panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee (“Panel”) found that on October 1, 2015, and October 29, 2015, MOC executed Exchange for Related Position (“EFRP”) transactions in the December 2015 Soybean Meal futures market between two accounts with common beneficial ownership by a single account controller. MOC priced each EFRP off the margin between previous customer sales contracts and the initial purchase contract with the knowledge and intent that the orders did not relate to the underlying physical contract between the two entities, and thus, were not bona fide. Further, the execution of the EFRP transactions were priced to facilitate the transfer of funds between the parties for a purpose other than legitimate commercial activity.

The Panel concluded that MOC thereby violated Legacy CBOT Rules 538.B, 538.C, and 538.F.

PENALTY:

In accordance with the settlement offer the Panel ordered MOC to pay a fine of $40,000.

EFFECTIVE DATE:

May 28, 2019