NOTICE OF DISCIPLINARY ACTION

MEMBER:

Budo Trading LLC

CME RULE VIOLATIONS:

Rule 432. General Offenses (in part)

It shall be an offense:

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

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 trades or 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)

Q13: Is it a violation of Rule 534 if orders initiated by one or more automated trading systems that are operated and/or controlled by the same individual or the same trading group match against each other?

A13: If a particular algorithm generates buy and sell orders that would potentially match against each other and such trades occur on more than an incidental basis in the context of the algorithm’s activity or in the context of the particular market’s activity, the trades may be deemed to violate the prohibition on wash trades. It is recommended in this circumstances that the party(ies) responsible for the operation of the algorithm employ functionality that will minimize the potential for the algorithm’s buy and sell orders to match with each other.

FINDINGS:

Pursuant to an offer of settlement in which Budo Trading LLC (“Budo”) neither admitted nor denied the rule violations or factual findings upon which the penalty is based, on June 26, 2024, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel”) found that from at least November 14, 2022, through February 28, 2023, Budo entered numerous opposing buy and sell orders, both manually and using an automated trading system, for the same account in various Micro Bitcoin and Micro Ether futures contracts that matched opposite each other on more than an incidental basis. Despite being notified on several occasions that it executed numerous self- matches, Budo relied on erroneous information that self-match prevention was enabled by its clearing firm without sufficiently investigating and monitoring for the self-match activity. Budo’s failures to employ functionality to minimize the potential for the orders to self-match resulted in Budo executing further self- matches. The Panel found that Budo reasonably should have known that entering orders in this manner would achieve a wash result.

The Panel therefore concluded that Budo violated CME Rules 432.W. and 534.

PENALTY:

In accordance with the settlement offer, the Panel ordered Budo to pay a $50,000 fine.