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      • CME 15-0151-BC
      • Effective Date
      • 23 June 2016

      Credit Suisse International


      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 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.

      Q11: Is there a specified minimum time period for which the initiating swap must be in force before it is unwound such that the EFR would not be considered transitory?

      A11: While the length of time between the transactions may be a consideration in assessing whether the EFRP is transitory, the legitimacy of the transactions will be evaluated based on whether the transactions have integrity as independent transactions exposed to market risk that is material in context of the transactions. Transactions that do not meet this test are considered prearranged futures trades that circumvent the open market execution requirement.


      Pursuant to an offer of settlement in which Credit Suisse International (“CSI”) neither admitted nor denied the rule violations upon which the penalty is based, on June 21, 2016, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel” or “BCC”) found that CSI is subject to the BCC’s jurisdiction pursuant to Rules 402 and 418, and that on June 23, 2014, CSI entered into an Exchange for Related Position (“EFRP”) transaction whereby it bought E-mini S&P 500 futures and sold SPDR S&P 500 exchange-traded fund (“SPY”) contracts. Contemporaneous with the execution of the EFRP, CSI bought the SPY contracts and sold CBOE September 2014 1950 strike S&P 500 Index (“SPX”) Option Combos with the same counterparty. The SPY contracts, used as the related position in the EFRP transaction, were immediately offset. The Panel further found that the execution of the two transactions involving the SPY contracts were not independent transactions exposed to market risk and therefore resulted in a transitory EFRP. Moreover, the Panel concluded that this was not a bona fide EFRP and that CSI violated CME Rule 538.A.


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


      June 23, 2016