NOTICE OF DISCIPLINARY ACTION

MEMBER:                          

Brad AuBuchon

CBOT RULE VIOLATIONS:                    

CBOT Rule 432: General Offenses

It shall be an offense:

Q.       to commit an act which is detrimental to the interest or welfare of the Exchange or to engage in any conduct which tends to impair the dignity or good name of the Exchange;

W.      for any party to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange;

FINDINGS:                        

Pursuant to an offer of settlement in which Brad AuBuchon neither admitted nor denied the rule violations upon which the penalty is based, on July 27, 2020, a Panel of the CBOT Business Conduct Committee (“Panel”) found that between November 15, 2017, and June 26, 2018, an automated trading system AuBuchon operated and monitored entered price modifications in various U.S. Treasury Options outrights and User Defined Spreads with incrementally widening spreads between the bid and offer prices, causing aberrant prices to be disseminated to the market. Specifically, this activity consisted of 181 instances in which AuBuchon submitted mass quotes with 1,000 or more unique ask prices in an instrument in a minute. After first being notified of the issue by Market Regulation, AuBuchon initially failed to rectify the problem, leading to several additional price-widening instances.

In addition, the Panel found that on December 21, 2018, AuBuchon designed and quickly deployed a trading algorithm that did not function as intended, instead executing numerous self-match transactions in various 10-Year T-Note risk reversals. The Panel found that the self-match transactions occurred as a result of various supervisory failures in the testing and design of AuBuchon’s algorithm, which were compounded by his failure to employ effective functionality designed to minimize self-matches.

The Panel concluded that AuBuchon thereby violated CBOT Rules 432.Q and 432.W.

PENALTY:                          

In accordance with the settlement offer, the Panel ordered AuBuchon to pay to the Exchange a fine of $20,000 and suspended him 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 30 business days, beginning on the effective date below and continuing through and including September 9, 2020. 

EFFECTIVE DATE:                               

July 29, 2020