NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CME 10-7786-BC

NON-MEMBER:

Virginia Beef Corporation

CME RULE VIOLATIONS:

(Legacy) Rule 443. Position Limit Violations

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….

Rule 10202.E. Position Limits (Feeder Cattle Futures)
No person shall own or control more than:

2. 300 contracts long or short in the spot month during the last ten days of
trading……

Rule 10A01.F. Position Limits (Feeder Cattle Options)

No person shall own or control a combination of options and underlying futures
that exceeds:

2. 300 futures equivalent contracts net on the same side of the market in the spot month during the last ten days of trading.

For the purpose of this rule, the futures equivalent of an option contract is 1
times the previous day’s IOM risk factor (delta) for the option series. Also for
purposes of this rule, a long call option, a short put option and a long underlying
futures contract are on the same side of the market, similarly, a short call
option, a long put option and a short underlying futures contract are on the
same side of the market.

FINDINGS:

Pursuant to an offer of settlement in which Virginia Beef Corporation (“Virginia Beef”) neither admitted nor denied the rule violation upon which the penalty is based, a Panel of the CME Business Conduct Committee (“Panel”) found that as of the close of business on October 14, 2010, Virginia Beef carried end of day positions in excess of the spot month speculative position limit in October Feeder Cattle 1100 put options by 31 contracts, or approximately 10%.

PENALTY:

In accordance with the settlement offer the Panel ordered Virginia Beef to pay a fine of $7,000 and disgorgement of $17,130.

EFFECTIVE DATE:

August 6, 2012