NOTICE OF DISCIPLINARY ACTION

MEMBER:

HSBC BANK plc

NYMEX RULE VIOLATION:

562. POSITION LIMIT VIOLATIONS

Any positions in excess of those permitted under the rules of the Exchange shall be deemed position limit violations.

FINDINGS:

Pursuant to an offer of settlement HSBC Bank plc (“HSBC”) presented at a hearing on June 25, 2020, in which HSBC neither admitted nor denied the rule violation upon which the penalty is based, a Panel of the NYMEX Business Conduct Committee (“Panel”) found that at close of business on August 29, 2019, HSBC held an open September 2019 Palladium (“SEP19PA”) futures position of 119 contracts short, which was 69 contracts, or 138%, over the standard 50 contract position limit in SEP19PA that went into effect at the close of business on that date, and that was in effect through the close of business on September 26, 2019. The Panel found that HSBC realized a profit of $1,270.00 by reducing the firm’s excess SEP19PA positions through the purchase of SEP19PA positions. HSBC Bank USA, NA (“HSBC US”) had previously applied for, and been granted, a limited hedge exemption contingent on physical delivery of palladium under Exchange rules. Because HSBC US’s limited hedge exemption was not applicable to HSBC’s short position on August 29, 2019, it could not be used to keep HSBC within the position limit.

The Panel found that as a result, HSBC violated Rule 562.

PENALTY:

In accordance with the settlement offer, the Panel ordered HSBC to pay a fine to the Exchange in the amount of $40,000 and disgorge profits in the amount of $1,270.00.