NOTICE OF DISCIPLINARY ACTION

MEMBER:

TOWER RESEARCH CAPITAL, LLC

EXCHANGE RULES:

RULE 432. GENERAL OFFENSES (IN PART)

It shall be an offense:

B.2. to engage in conduct or proceedings inconsistent with just and equitable principles of trade;

Q. to commit an act which is detrimental to the interest or welfare of the Exchange or to engage in any conduct which tends to impair the dignity or good name of the Exchange;

T. to engage in dishonorable or uncommercial conduct;

W. for any party to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange.

RULE 433. STRICT LIABILITY FOR THE ACTS OF AGENTS

Pursuant to Section 2(a)(1)(B) of the Commodity Exchange Act, and notwithstanding Rule 432.W., the act, omission, or failure of any official, agent, or other person acting for any party within the scope of his employment or office shall be deemed the act, omission or failure of the party, as well as of the official, agent or other person who committed the act.

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 Tower Research Capital, LLC (“Tower”) neither admitted nor denied the rule violations or factual findings upon which the penalty is based, on November 1, 2017, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“Panel”) found that, during the time period from November 1, 2013 through December 27, 2013, Tower failed to ensure that its Tag 50 user ID registrations were current and accurate at all times. The Panel also found that, during this time period, Tower failed to supervise the use of Tag 50s by its employees to make certain that its traders used a unique user ID to access GLOBEX. It was the Panel’s finding that Tower’s failure to maintain adequate and current records of its Tag 50 user ID registrations delayed the Exchange’s investigation into the trading activity of Tower’s employees. However, subsequent cooperation by Tower allowed the Exchange to determine, among other things, the trades made by each Tower employee. The Panel concluded that Tower violated Exchange Rules 432.W. and 576.

The Panel also found that, during the time period from November 1, 2013 to December 27, 2013, three Tower traders, none of whom still works at Tower, entered orders without an intent to trade in the E-mini S&P 500 and E-mini NASDAQ Futures contract markets. The Panel concluded that, pursuant to Exchange Rule 433, Tower is strictly liable for the acts of its employees whose conduct the Panel concluded violated Exchange Rules 432. B.2., 432.Q., and 432.T.

PENALTY:

In accordance with the settlement offer, the Panel ordered Tower to pay a total monetary fine in the amount of $150,000 and to disgorge total profits in the amount of $162,000 in connection with this case and companion cases CBOT/NYMEX/COMEX 13-9693-BC ($120,000 of the monetary fine and $92,000 of the disgorgement of which is allocated to CME).