NOTICE OF DISCIPLINARY ACTION

MEMBER:

Fred Bowers

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 trades or 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.

CBOT Market Regulation Advisory Notice RA 1903-5 (in part)

Q5: Is it a violation of Rule 534 if resting orders in the order book entered during the Globex pre-open match opposite one another once the market opens?

A5: Yes. Market participants should have a reasonable expectation that their resting buy and sell orders may match opposite each other when the market opens if the buy orders are priced at or above the price of their resting sell orders or the sell orders are priced at or below the price of their resting buy orders. If a market participant’s buy and sell orders match opposite one another when the market opens as a result of orders entered during the Globex pre-open period that a party knew or should have known would match, the party has violated Rule 534.

FINDINGS:

Pursuant to an offer of settlement in which Fred Bowers (“Bowers”) neither admitted nor denied the rule violations upon which the penalty is based, on June 23, 2020, a Panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee (“Panel”) found that on August 14, 2019, Bowers entered crossed-market buy and sell orders on the CME Globex trading platform during the January – March 2020 Soybean Oil futures spread market pre-open session that self-matched upon the opening match of the spread. The Panel found that given the pricing of his opposing orders, Bowers reasonably should have known that the orders would match upon the open and not result in a bona fide market position exposed to market risk.

The Panel concluded that Bowers thereby violated CBOT Rule 534.

PENALTY:

In accordance with the settlement offer, the Panel ordered Bowers to pay a fine of $10,000. The Panel also suspended Bowers from access to any trading floor owned or controlled by CME Group and from direct and indirect access to any designated contract market, derivatives clearing organization or swap execution facility owned or controlled by CME Group for five (5) business days, beginning on the effective date below and continuing through and including July 1, 2020.

EFFECTIVE DATE:

June 25, 2020