NOTICE OF DISCIPLINARY ACTION

NON-MEMBER FIRM:

RAF Fund LTD

CME RULE VIOLATIONS:

538.A. Nature of an EFRP

An EFRP consists of two discrete but related simultaneous transactions. One party to the EFRP must be the buyer of (or the holder of the long market exposure associated with) the related position and the seller of the corresponding Exchange contract. The other party to the EFRP must be the seller of (or the holder of the short market exposure associated with) the related position and the buyer of the corresponding Exchange contract.

Market Regulation Advisory Notice Exchange for Related Positions Rule 538
RA 1006-5: (in part)

Q9: In which products are transitory EFRPs permitted?

A9: Transitory EFRPs are EFRPs in which two parties contemporaneously execute an EFRP transaction and an additional cash or OTC transaction that offsets the cash or OTC component of the EFRP; such transactions are permitted exclusively in NYMEX energy and metals products, COMEX metals products, and CME foreign exchange (“FX”) products.

FINDINGS:

Pursuant to an offer of settlement in which RAF Fund LTD (“RAF”) neither admitted nor denied the rule violation upon which the penalty is based, on June 1, 2016, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel or BCC”) found that it has jurisdiction over RAF pursuant to Rules 400 and 418, and that on August 8, 2013, RAF entered into a swap agreement consisting of two transactions constituting a spread. The transactions were terminated the next day via an Exchange for Risk (“EFR”) transaction in the Live Cattle futures markets at the same price as the swap agreement, thereby allowing RAF to avoid taking a bona fide market risk. The Panel therefore found that the EFR was transitory.

The Panel concluded that RAF thereby violated CME Rule 538.A.

PENALTY:

In accordance with the settlement offer, the Panel ordered RAF to pay a fine of $15,000.

EFFECTIVE DATE:

June 3, 2016