L3 Gestora de Recursos LTDA
CME RULE VIOLATIONS:
CME Rule 432.W: General Offenses
It shall be an offense for any party to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange.
CME 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 of wash trades.
Pursuant to an offer of settlement in which L3 Gestora de Recursos LTDA (“L3”) neither admitted nor denied the rule violations upon which the penalty is based, on April 20, 2020, a Panel of the CME Business Conduct Committee (“Panel”) found that on November 9, 2018, a principal at L3 orchestrated three transactions in CME Premium Quoted European Style options on Euro/US Dollar futures where L3 owned the accounts on both sides of the transactions. Specifically, the principal placed sell orders between the buy/ask spread, and then placed buy orders through another trader that traded opposite his resting orders. The purpose of these transactions was to move positions between L3 accounts. The Panel also found that, at the time of those transactions, L3 failed to diligently train and supervise its principal in a manner sufficient to ensure that his conduct was consistent with Exchange rules.
The Panel concluded that L3 thereby violated CME Rules 432.W. and 534.
In accordance with the settlement offer, the Panel ordered L3 to pay a fine of $30,000.
April 22, 2020