NOTICE OF DISCIPLINARY ACTION

MEMBER:

MERRILL LYNCH COMMODITIES INC.

NYMEX RULE VIOLATION: 538.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.

The facilitation of the execution of an EFRP by any party that knows such EFRP is non bona fide shall constitute a violation of this Rule.

FINDINGS:

Pursuant to an offer of settlement Merrill Lynch Commodities Inc. (“MLCI”) presented at a hearing on October 21, 2020, in which MLCI neither admitted nor denied the rule violation upon which the penalty is based, a Panel of the NYMEX Business Conduct Committee (“Panel”) found that on May 1, 2019 and June 21, 2019, MLCI executed multiple non-bona fide EFRP transactions in the NY Harbor ULSD Futures and Light Sweet Crude Oil futures contracts. The EFRPs transactions were non-bona fide as they were contingent upon each other and were executed in a manner designed to avoid any material market risk associated with the EFRPs’ related position components.

The Panel found that, as a result, MLCI violated Exchange Rules 538.C. (EFRP – Related Position).

PENALTY:

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