• NOTICE OF DISCIPLINARY ACTION

      • #
      • CBOT-19-1109-BC
      • Effective Date
      • 27 November 2019
    • FILE NO.:

      CBOT 19-1109-BC

      MEMBER FIRM:

      Goldman Sachs & Co. LLC

      CBOT RULE VIOLATIONS:

      Rule 538.C. Related Position

      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.
      The execution of an EFRP transaction may not be contingent upon the execution of another EFRP or related position transaction between the parties where the transactions result in the offset of the related position without the incurrence of market risk that is material in the context of the related position transactions.

      FINDINGS:

      Pursuant to an offer of settlement in which Goldman Sachs & Co. LLC (“Goldman”) neither admitted nor denied the rule violations or factual findings upon which the penalty is based, on November 25, 2019, a Panel of the Chicago Board of Trade Business Conduct Committee (“Panel”) found that on July 9, 2018, Goldman executed an Exchange for Related Position (“EFRP”) package in the Ten -Year Treasury Note futures and options markets where the related position components of the Exchange for Risk (“EFR”) transaction did not have a reasonable degree of price correlation and did not have opposing market bias to the Exchange component. Further, the related component of the Exchange of Option for Option (“EOO”) transaction was not reasonably equivalent to the Exchange component. The EFRP package was therefore non-bona fide.

      The Panel thus concluded that Goldman thereby violated CBOT Rules 538.C.

      PENALTY:

      In accordance with the settlement offer, the Panel ordered Goldman to pay a fine of $15,000.

      EFFECTIVE DATE:

      November 27, 2019