NOTICE OF DISCIPLINARY ACTION

MEMBER:

VIRTU AMERICAS LLC

COMEX RULES:

Rule 432. General Offenses (in part)

It shall be an offense:

L. 3. to fail to produce any books or records requested by duly authorized Exchange staff, in the format and medium specified in the request, within 10 days after such request is made or such shorter period of time as determined by the Market Regulation Department in exigent circumstances.

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

Rule 526. Block Trades (in part)

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 534. Wash Trades Prohibited

No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means.

CME Group RA1908-5R, RA1916-5 and RA2002-5

Block Trades between Different Accounts with Common Beneficial Ownership (Section 3)

Block trades between different accounts with common beneficial ownership are prohibited unless 1) each party’s decision to enter into the block trade is made by an independent decision-maker; 2) each party has a legal and independent bona fide business purpose for engaging in the block trade; and 3) the block trade is executed at a fair and reasonable price. In the absence of satisfying all the aforementioned requirements, the transaction may constitute an illegal wash trade prohibited by Rule 534 (“Wash Trades Prohibited”). Common beneficial ownership is defined as not only accounts with the same beneficial ownership, but also accounts with common beneficial ownership that is less than 100%.

Block Trade Submission Requirements to CME Clearing (Section 7 in part)

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.

FINDINGS:

Pursuant to an offer of settlement in which Virtu Americas LLC (“VAL”) neither admitted nor denied the rule violations upon which the penalty is based, on July 6, 2022, a Panel of the COMEX Business Conduct Committee (“BCC Panel”) found that on several occasions between November 2019, and April 2020, VAL submitted multiple block trades with inaccurate execution times and also failed to report multiple block trades to the Exchange within the required time period following execution in various Gold and Silver futures contracts. Additionally, the Panel found that a VAL trader executed a Gold futures block trade on April 16, 2020, on behalf of a VAL account opposite another account with common beneficial ownership. The Panel found that each party’s decision to enter into the block trade was not made by an independent decision maker. The Panel found that as a result of the foregoing, VAL violated COMEX Rules 526, 526.F., and 534.

Moreover, the Panel found that between November 2019, and April 2020, VAL failed to make a complete production of responsive records in a timely manner to several requests by duly authorized Exchange staff to produce records, including trade-related electronic chat communications. The Panel also found that VAL failed to diligently supervise its employees by not properly advising and training its traders as to relevant Exchange rules and MRANs, and by failing to ensure that its compliance personnel provided clear and accurate guidance to the traders regarding the execution of block trades and wash transactions. The Panel found that as a result of the foregoing, VAL violated COMEX Rules 432.L.3. and 432.W.

PENALTY:

In accordance with the settlement offer, the BCC Panel ordered VAL to pay a $75,000 fine in connection with this case and companion case NYMEX 20-1273-BC, $50,000 of which is to be paid to COMEX.