NOTICE OF DISCIPLINARY ACTION

MEMBER:

WEDBUSH SECURITIES, INC.

CBOT 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.

561. Submission of Large Trader Positions and Volume Threshold Accounts (In Part)

561.A. Large Trader Reporting

Clearing members, omnibus accounts and foreign brokers shall electronically submit to the Exchange a daily large trader position report of all positions required to be reported as set forth in the Position Limit, Position Accountability and Reportable Level Table, in the Interpretations Section at the end of Chapter 5. Positions at or above the reportable level in a particular expiration month of a futures contract, or in all puts or in all calls of a particular option contract expiration month, are required to be reported. For an account with reportable positions in a particular contract, all positions, regardless of size, in any contract month and in any contract that aggregates with that contract must be reported.

807. Open Long Positions During Delivery Month

At such times and in such manner as shall be prescribed by the Manual, clearing members shall submit a complete and accurate record of dates of all open purchases for use in making deliveries. Clearing members shall be fully responsible for inventories submitted to the Clearing House. This rule shall not apply to trading in options contracts.

811. Position Change Data

Position change data must be submitted to the Clearing House each trading day not later than the time specified by the Clearing House. Position change data will be in such form and contain such information as prescribed by the Clearing House. When requested, the identification of accounts will be made available to the Financial and Regulatory Surveillance Department.

854. Concurrent Long and Short Positions (In Part)

Set forth below are the procedures that must be followed for concurrent long and short positions and hold-open accounts.

B. Concurrent long and short positions in physically delivered contracts subject to spot month position limits that are held by the same owner during the time that spot month position limits are in effect must be offset by transactions executed in the market, by allowable privately negotiated transactions, or fulfilled through the normal delivery process, provided however that trades may be offset via netting, transfer or position adjustment to correct a bona fide clerical or operational error on the day the error is identified and the quantity of the offset does not represent more than two percent of the reported open interest in the affected futures contract month. Permissible Exceptions Notwithstanding the foregoing: 1. Trades may be transferred for offset if the trade date of the position being transferred is the same as the transfer date; 2. An account that becomes concurrently long and short as a result of a futures position that results from an option assignment will be allowed one business day to net such positions; or, 3. Where the Chief Regulatory Officer or his designee determines, in their respective sole discretion, that permitting an offset via netting, transfer or position adjustment in excess of two percent of the reported open interest will not adversely impact either the affected market or any persons holding open positions in the affected market.

C. Clearing members which, pursuant to this rule, carry concurrent long and short positions, must report to the Exchange both sides as open positions. When either side or both sides are reduced, the open positions as reported to the Exchange must be reduced accordingly, and, pursuant to Rule 806, may not subsequently be re-opened at the Exchange.

FINDINGS:

Pursuant to an offer of settlement, in which Wedbush Securities Inc. neither admitted or denied the Rule violations or factual findings upon which the penalty is based, on November 15, 2023, a Panel of the CBOT Business Conduct Committee (“Panel”) found that on February 24, 2022, Wedbush’s back-office accounting platform failed to maintain records of cleared trades after its settlement platform reached an upper limit of traded contracts due to extremely high trading volume. As a result, from that date through March 2022, Wedbush: (1) submitted inaccurate large trader position reports to the Exchange; (2) failed to submit position change data to the Clearing House in a timely manner; (3) submitted position adjustments to the Exchange that were greater than two percent – and on several occasions greater than 35 percent – of the reported open interest in physically delivered contracts subject to spot month position limits; and (4) failed to accurately report concurrent long and short positions as open positions and/or accurately report reductions to these positions.

These inaccurate and untimely reports included positions in various contract months of Soybean Meal futures and options on futures (“F&O”), Soybean Oil F&O, U.S. Treasury Bond futures, 10-Year T-Note futures, 5-Year T-Note F&O, 2-Year T-Note futures, 30 Day Federal Funds futures, Micro 10-Year Yield futures, Micro 2-Year Yield futures, Micro 5-Year Yield futures, Corn F&O, Short- Dated New Crop Corn options, 5-Year T-Note weekly options, KC HRW Wheat F&O, 5-Year Eris SOFR Swap futures, Micro E-mini Dow Jones Industrial Average Index futures, Corn weekly options, Corn Calendar Spread options, Soybean F&O, Soybean Calendar Spread options, Short-Dated New Crop Soybean options, Ultra 10-Year U.S. Treasury Note futures, Chicago SRW Wheat F&O, Mini Corn futures, Mini Soybean futures, E-mini Dow Jones Industrial Average Index futures, and Mini Chicago SRW Wheat futures.

Further, Wedbush failed to submit complete and accurate records to the Clearing House of dates of all open purchases carried at the firm for use in making deliveries of U.S. Treasury, Soybean, and Corn futures on four dates in June 2022.

The Panel also found that on multiple occasions from March 2022 to April 2022, Wedbush failed to respond to requests from duly authorized Exchange staff for information pertaining to position data in a timely manner.

The Panel found that as a result of the foregoing, Wedbush violated CBOT Rules 561.A., 811, 854.B., 854.C., 807, and 432.L.3.

PENALTY:

In accordance with the settlement offer, the Panel ordered Wedbush to pay a fine in the amount of $175,000 in connection with this case and companion cases NYMEX 22-1591-BC, COMEX 22-1591-BC, and CME 22-1591-BC ($75,000 allocated to CBOT).