NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CBOT 10-7789-BC

MEMBER:

Fortress Investment Group
 

CBOT RULES:

(Legacy) Rule 443. Position Limit Violations (in part)

The Market Regulation Department and the BCC shall have the authority to enforce the position limit rules of the Exchange. For purposes of this rule, any positions in excess of those permitted under the rules of the Exchange shall be deemed position limit violations…

14102.E. WHEAT FUTURES (in part)
No person shall own or control positions in excess of:

2. 5,000 futures-equivalent contracts net long or net short in any single contract month excluding the spot month. Additional futures contracts may be held outside of the spot month as part of futures/futures spreads within a crop year provided that the total of such positions, when combined with outright positions, does not exceed the all months combined limit.
3. 6,500 futures-equivalent contracts net long or net short in all months combined...

(Legacy) Rule 432.Q.
It shall be an offense:

Q. to commit an act which is detrimental to the interest or welfare of the Exchange or to engage in any conduct which tends to impair the dignity or good name of the Exchange.

FINDINGS:

After an evidentiary hearing on the merits of the case, which was held on November 27, 2012, a Panel of the CBOT Business Conduct Committee (“Panel”) found that Fortress Investment Group (“Fortress”) exceeded the single contract month speculative position limit of 5,000 futures-equivalent contracts in December 2010 Wheat futures on October 27, 2010, by 372.209 contracts, and on October 28, 2010, by 349.758 contracts. The Panel concluded that in so doing, Fortress violated (Legacy) CBOT Rule 443.

Further, the Panel found that Fortress failed to liquidate its positions in excess of the applicable limit in a timely manner, in that Fortress did not liquidate its violative position until 11:15 AM (CT) on October 29, 2010. The Panel concluded that in so doing, Fortress violated (Legacy) CBOT Rule 432.Q.

PENALTY:

Based on the record and the Panel’s findings and conclusions, the Panel ordered Fortress to pay a fine of $90,000 and to disgorge profits in the amount of $352,630.81.

EFFECTIVE DATE:

July 22, 2013