NOTICE OF DISCIPLINARY ACTION

MEMBER:

Penson Futures (f/k/a Penson GHCO)

CBOT RULE VIOLATION:

(Legacy) Rule 854. CONCURRENT LONG AND SHORT POSITIONS

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

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B. Concurrent long and short positions in physically delivered contracts that are held by the same owner during the delivery month and two business days prior to the delivery month 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 transferred for offset if the trade date of the position being transferred is the same as the transfer date. Such positions may not be offset via netting, transfer, or position adjustment except to correct a bona fide clerical or operational error on the day the error is identified and provided that the quantity of the offset does not represent more than one percent of the reported open interest in the affected futures contract month.

C. Clearing members which, pursuant to this rule, carry concurrent long and short positions, must report to the Clearing House both sides as open positions. When either side or both sides are reduced in accordance with Section B. of this rule, the open positions as reported to the Clearing House must be reduced accordingly.

D. The Exchange takes no position regarding the internal bookkeeping procedures of its clearing members which, for the convenience of a customer, may "hold open" a position only on their books. However, the clearing member must accurately report to the Exchange and the Clearing House, as appropriate, large trader positions, long positions eligible for delivery and open interest.

FINDINGS:

Pursuant to an offer of settlement in which Penson Futures (f/k/a Penson GHCO) (“Penson”) neither admitted nor denied the findings or any rule violation upon which the penalty is based, on March 9, 2016, a Panel of the CBOT Business Conduct Committee (“Committee” or “Panel”) found that it had jurisdiction over Penson pursuant to CBOT Rules 400 and 402 as the conduct occurred while Penson was a CBOT member. The Panel also found that between July and September 2010, Penson failed to accurately report open interest to the Exchange by impermissibly netting down long and short positions during the first two business days prior to the delivery month and/or during the delivery month itself for expiring Corn, Wheat, Oat, Soybeans, Soybean Meal, Soybean Oil, Rough Rice, Mini-Wheat, Mini-Corn, and/or Mini-Soybeans futures contracts on 35 occasions. In each instance the misreport was due to an “error” as defined by (Legacy) CBOT Rule 854.B., however the misreported positions exceeded one-percent of the open interest in the specified contract.

The Panel further found that on November 29 and November 30, 2011, less than two business days prior to the first delivery day in the December 2011 Oat futures contract, Penson failed to accurately report open interest to the Exchange by impermissibly netting down its long and short positions.

The Panel found that in so doing, Penson violated Legacy (Legacy) CBOT Rule 854.

PENALTY:

In accordance with the settlement offer, the Panel ordered Penson to pay a fine of $100,000.

EFFECTIVE DATE:

March 11, 2016