NOTICE OF DISCIPLINARY ACTION

MEMBER:

TFS DERIVATIVES, LTD.

EXCHANGE RULE:

RULE 526. BLOCK TRADES

The Exchange shall designate the products in which block trades shall be permitted and determine the minimum quantity thresholds for such transactions. The following shall govern block trades:

F. Unless otherwise agreed to by the principal counterparties to the block trade, the seller, or, in the case of a brokered transaction, the broker handling the block trade, must ensure that each block trade is reported to the Exchange within the time period and in the manner specified by the Exchange. The report must include the contract, contract month, price, quantity of the transaction, the respective clearing members, the time of execution, and, for options, strike price, put or call and expiration month. The Exchange shall promptly publish such information separately from the reports of transactions in the regular market.

RULE 536.E. NEGOTIATED TRADES

At the time of execution, every order received from a customer for execution pursuant to Rule 526…must be in the form of a written or electronic record and include an electronic timestamp reflecting the date and time such order was received, and must identify the specific account(s) for which the order was placed. Such record shall also include an electronic timestamp reflecting the date and time such order was modified, returned, confirmed or cancelled.

RULE 432. GENERAL OFFENSES (in part)

It shall be an offense

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

CME GROUP MARKET REGULATION ADVISORY NOTICE RA1806-5:

Block Trade Submission Requirements to CME Clearing

Please note that the execution time of a block trade is the time that the parties agree to the trade. Market Participants must accurately report the execution time of the block trade. The reporting of inaccurate execution times may result in disciplinary action.

FINDINGS:

Pursuant to an offer of settlement that TFS Derivatives, Ltd. (“TFS”) presented at a hearing on August 13, 2020 in which TFS neither admitted nor denied the findings or conclusions or any rule violations upon which the penalty is based, a Panel of the NYMEX Business Conduct Committee (“Panel”) found that during the time period of June 1 through June 30, 2019, TFS submitted numerous block trades in European Naphtha products utilizing a flawed process that was contrary to the manner specified by the Exchange. Specifically, TFS would execute the block trade in principle by having the counterparties agree to all of the details of a block trade except for the price, and report the block trade later in the day using a specially-calculated market price at 4:30 pm local time. TFS did not facilitate further block trade negotiations once the price was known at 4:30 pm to ascertain whether the counterparties were still willing to enter into the block trade at the determined price, and therefore failed to correctly execute, record and report the block trades at issue. Additionally, the Panel found that TFS failed to properly advise and train its employees as to relevant Exchange rules and Market Regulation Advisory Notices (“MRANs”) in a manner sufficient to ensure compliance with the same.

The Panel found that as a result of the foregoing, TFS violated NYMEX Rules 526.F (“Block Trades”), 536.E (Negotiated Trades) and 432.W. (“General Offenses – Failure to Supervise”).

PENALTY:

In accordance with the settlement offer, the Panel ordered TFS to pay a fine to the Exchange in the amount of $50,000.