NOTICE OF DISCIPLINARY ACTION

NON-MEMBER:

Wolverine Trading, LLC

CME RULE VIOLATION:

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 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 RA0913-5 FAQ (in part)

Q11- Under what circumstances is trading with oneself on the electronic platform a violation of exchange rules regarding wash trading?

A11- Rule 534 provides that buy and sell orders for accounts with common beneficial ownership must be entered in good faith for the purpose of making bona fide transactions. Thus, it is a violation of 534 for a market participant to enter an order on the electronic system that he knew or should have known would match with a resting order on the other side of the market for an account with common beneficial ownership. Generally, an unintentional and incidental matching of such buy and sell orders will not be considered a violation of Rule 534. However, active traders who frequently enter orders on opposing sides of the market which may have a tendency to cross are strongly encouraged to employ functionality designed to minimize or eliminate their buy and sell orders from matching with each other.

Rule 576. Identification of Globex Terminal Operators

Each Globex terminal operator shall be identified to the Exchange, in the manner prescribed by the Exchange, and shall be subject to Exchange rules. If user IDs are required to be registered with the Exchange, it is the duty of the clearing member to ensure that registration is current and accurate at all times. Each individual must use a unique user ID to access Globex. In no event may a person enter an order or permit the entry of an order by an individual using a user ID other than the individual’s own unique user ID.

FINDINGS:

Pursuant to an offer of settlement in which Wolverine Trading, LLC (“Wolverine”) neither admitted nor denied the rule violation upon which the penalty is based, on August 19, 2015, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“Panel”) found that it had jurisdiction over Wolverine pursuant to Rules 400 and 402 as the conduct occurred while Wolverine was an affiliate of a CME member. The Panel also found that on several occasions between February 2013 and April 2013, Wolverine utilized an automated trading system (“ATS”) that executed multiple transactions in several FX products wherein orders for Wolverine accounts self-matched. The Panel further found that although the ATS was not designed to execute self-matches, Wolverine should have reasonably known that the orders entered by the ATS would match. The Panel also found that on these occasions Wolverine failed to employ effective functionality designed to minimize self-matches. Lastly, the Panel found that between February 2012 and September 2012, Wolverine erroneously assigned a single Tag50 user identification to multiple algorithms it employed in various FX products. The Panel concluded that Wolverine thereby violated CME Rules 534 and 576.

PENALTY:

In accordance with the settlement offer, the Panel ordered Wolverine to pay a fine in the amount of $50,000.

EFFECTIVE DATE:

August 21, 2015

Please see the related disciplinary release in companion cases CBOT 12-9127-BC and NYMEX 12-9127-BC.