NOTICE OF DISCIPLINARY ACTION

NON-MEMBER:                        

Aves Trade DMCC

CBOT RULE VIOLATION:                    

Rule 538. Exchange for Related Positions (in part)

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 Aves Trade DMCC  (“Aves”) neither admitted nor denied the rule violation upon which the penalty is based, on July 27, 2020, a Panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee (“BCC” or “Panel”) found that on April 11, 2018, and on April 13, 2018, Aves executed Exchange for Related Position transactions in the May 18 Soybean Meal  futures market for the purpose of rebalancing accounts to satisfy margin requirements. Each transaction consisted of the simultaneous exchange of futures positions without the exchange of related cash positions, thereby executing non-bona fide Exchange for Physical (“EFP”) transactions. The Panel further found that the positions could have been transferred instead of executing an EFP. The Panel concluded that Aves thereby violated CBOT Rule 538.C.

PENALTY:                         

In accordance with the settlement offer, the Panel ordered Aves to pay a fine of $25,000.

EFFECTIVE DATE:                               

July 29, 2020