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      • CBOT 20-1343-BC-1
      • Effective Date
      • 20 May 2021

      Capula Investment Management LLP

      CBOT RULE VIOLATION: Rule 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.


      Pursuant to an offer of settlement in which Capula Investment Management LLP (“Capula”) neither admitted nor denied the rule violation or factual findings upon which the penalty is based, on May 18, 2021, a Panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee (“Panel”) found that on two dates between February and June 2020, Capula executed certain Exchange for Related Position (“EFRP”) transactions in the June 2020 Ultra U.S. Treasury Bond futures, June 2020 Five Year Treasury Note futures, June 2020 Ten Year Treasury Note futures, and June 2020 U.S. Treasury Bond futures contracts that were contingent upon the execution of other EFRP transactions. The Panel further found that Capula executed the EFRPs for the purpose of rebalancing positions held by various Capula funds. These orders were structured such that they were executed without the incurrence of material market risk.

      The Panel concluded that Capula thereby violated CBOT Rule 538.C.


      In accordance with the settlement offer, the Panel ordered Capula to pay a fine of