• #
      • COMEX 13-9300-BC
      • Effective Date
      • 20 March 2014
    • FILE NO.:

      COMEX 13-9300-BC


      HSBC Bank USA N.A.


      538.H. Documentation

      Parties to any EFRP transaction must maintain all documents relevant to the Exchange contract and the cash, OTC swap, OTC option, or other OTC derivatives, including all documents customarily generated in accordance with relevant market practices and any documents reflecting payment and transfer of title. Any such documents must be provided to the Exchange upon request, and it shall be the responsibility of the carrying clearing member firm to provide such requested documentation on a timely basis.

      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.


      Pursuant to an offer of settlement that HSBC Bank USA N.A. (“HSBC”) presented at a hearing on March 18, 2014 in which HSBC neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“Panel”) found that HSBC is subject to the jurisdiction of the Exchange pursuant to Rules 400 and 402 as it is an affiliate of COMEX clearing member HSBC Securities USA Inc. and that on January 28, 2013 HSBC entered into two EFRP transactions and on May 30, 2012, HSBC entered into one EFRP transaction, in which HSBC was on both sides of the transactions. The Panel also found that the transactions did not contain documentation of the corresponding cash positions and, thus, were not bona fide EFRP transactions.

      The Panel found that as a result, HSBC violated Rules, 538.H. and 534.


      In accordance with the settlement offer, the Panel ordered HSBC to pay a fine to the Exchange in the amount of $40,000.


      March 20, 2014