NOTICE OF DISCIPLINARY ACTION

MEMBER:

Geneva Trading USA, LLC

CBOT RULE VIOLATION:

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 575. Disruptive Practices Prohibited (in part)

D. No Person shall enter or cause to be entered an actionable or non-actionable message with intent to disrupt, or with reckless disregard for the adverse impact on, the orderly conduct of trading or the fair execution of transactions.

FINDINGS:

Pursuant to an offer of settlement in which Geneva Trading USA, LLC neither admitted nor denied the rule violation or factual findings upon which the penalty is based, on July 16, 2024, a Panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee (“Panel”) found that during regular trading hours on May 26, 2021, Geneva had multiple sell orders resting at the best offer in the June 2021-September 2021 U.S. Treasury Bond futures calendar spread market. After another market participant lifted multiple orders at the best offer price, one of Geneva’s automated trading systems (“ATS”) responded to its fills with a series of buy orders to hedge its position. Without set price banding-limits on the orders, the ATS entered and modified aggressive buy orders multiple times with increasing order quantity and order price. These orders traded through multiple price levels in the order book, which caused a short-term price spike in the spread instrument and a temporary halt to the market (Velocity Logic event). The Panel found that Geneva’s buy orders were disruptive to the orderly trading of the market.

Subsequently, on October 14, 2021, Geneva had large orders resting across multiple price levels on the bid in the December 2021 2-Year Treasury Note futures market. While these orders were resting in the market, a market participant entered numerous large aggressive fill-and-kill (“FAK”) sell orders that traded through multiple levels of the order book and resulted in a Velocity Logic event. When the market reopened, a Geneva ATS aggressively sold thousands of contracts across multiple price levels to hedge its position. While Geneva had sell-side price banding in place, the bands were set to an effectual price that effectively negated its purpose. The Panel found that Geneva’s sell orders and subsequent fills caused a price spike and were disruptive to the orderly trading of the market.

The Panel found that as a result of the foregoing, Geneva violated CBOT Rules 575.D. and 432.W.

PENALTY:

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