Haitong International Futures Limited agreed to pay a fine of US $90,000 to the CME Group to resolve charges that, on multiple dates between December 2012 and June 2014, the firm executed numerous transactions for a client in the E-mini Dow calendar spread that purposely self-matched. According to the findings of the relevant Chicago Board of Trade business conduct committee, “[t]he matching buy and sell orders were entered with the knowledge and intent that the orders would match opposite one another. The purpose of these transactions was to roll positions from one contract month to the next.” Haitong, a CME Group non-member firm, was also charged with not assigning unique user IDs—known as “Tag 50s”—in connection with its electronic trading. Separately, Abengoa Bioenergy Operations, LLC, another CME Group non-member, agreed to pay a fine of US $35,000 to resolve CBOT charges that, on five days in 2013, it engaged in exchange for related position transactions where the firm owned and controlled both accounts involved in the relevant transaction; did not transfer a relation position in connection with an exchange for physical transaction; or did not have sufficient documentation of the corresponding cash position in an EFP transaction. Also, four CME Group members—Frank Catalano, Kevin Loftus, Christopher McGrath and Patrick Weber—agreed to pay fines between US $15,000 and US $35,000 and/or to CME Group trading suspensions to resolve allegations related to impermissible non-competitive open-outcry trades, while five persons—including both members and non-members—Aaron Benn, Drew Heynen, David Taylor, Robert Wharton and Ryan Zee—settled CME Group allegations related to various trade practice offenses by payment of fines between US $10,000 and US $30,000 and/or a CME Group trading suspension. Finally, ABN AMRO Clearing Chicago, LLC agreed to pay a fine of US $25,000 for misreporting open interest in the July 2013 Lumber Futures contract on June 28, 2013, and submitting a correction 16 minutes late on July 1, 2013.
Compliance Weeds: The Haitong disciplinary action should remind non-member traders that they have express obligations when they access CME Group markets electronically, and could be held liable if they fail to fulfill their obligations. Among other things, each person entering orders manually or automatically into CME Globex must ensure that the order is accompanied by an operator identification known as a “Tag 50 ID.” This identification must be unique to the individual entering the order or, in the case of an automated trading system, the team of persons on the same shift responsible for the ATS’s operation. All Tag 50s must also be unique at the level of the clearing member firm. Only certain Tag 50s must be affirmatively registered with CME Group—those associated parties receiving preferential fees or those requested by Market Regulation or the Globex Control Center (typically when the participant generates significant messaging volume). Individuals and team members may not permit their unique Tag 50s to be used by other persons. (Click here for a CME Group summary of Tag 50 requirements, and here for access to relevant CME Group rules 576 and 536B2.) Other exchanges have equivalent requirements (e.g., ICE Futures U.S.; click here to access IFUS Rule 27.12(f)).