NOTICE OF DISCIPLINARY ACTION

MEMBER:

Deutsche Bank AG London Branch

CME RULE VIOLATION:

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.

Market Regulation Advisory Notice CME Group RA2008-5 (In Part)

Q11: Under what circumstances does trading opposite one’s own order on the electronic platform violate Rule 534?

A11: It is a violation of Rule 534 for an individual to enter an order on the electronic platform that the individual knew or reasonably should have known would trade against his own order resting on the opposite side of the market. The unintentional and incidental matching of buy and sell orders entered by an individual trader on the electronic platform generally will not be considered a violation of Rule 534. However, if such self-matching occurs on more than an incidental basis in the context of the trader’s activity or in the context of the particular market’s activity, such trades may be deemed to violate the prohibition on wash trades.

FINDINGS:

Pursuant to an offer of settlement in which Deutsche Bank AG London Branch (“DBAG London”) neither admitted nor denied the rule violation or factual findings upon which the penalty is based, on December 7, 2023, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“Panel”) found that on June 8 and June 9, 2022, DBAG London operated an automated trading system that entered multiple opposing buy and sell orders for the same account in June 2022 New Zealand Dollars Futures Non-inverted CME FX Link Spreads, Swiss Franc Futures Inverted CME FX Link Spreads, and Euro FX Futures Non-Inverted CME FX Link Spreads. DBAG London’s ATS was coded to consider the basis between related markets, and the algorithm adjusted order prices in response to tightening bid-ask spreads in these markets. Because the ATS was subject to minimum tick increments and rounding logic, the adjusted order prices DBAG London’s algorithm entered in the futures markets became opposing buy and sell orders at the same prices. These orders then traded opposite each other in the same DBAG London account causing self-matching to occur on more than an incidental basis. The Panel found that DBAG London reasonably should have known that entering orders in this manner would achieve a wash result.

The Panel therefore concluded that DBAG London violated CME Rule 534.

PENALTY:

In accordance with the settlement offer, the Panel ordered DBAG London to pay a $70,000 fine.