NOTICE OF DISCIPLINARY ACTION

FILE NO.:

CME 15-0334-BC

MEMBER FIRM:

AlphaBit Trading, LLC

CME RULE VIOLATION:

Rule 432.W. General Offenses

It shall be an offense for any party to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange.

FINDINGS:

Pursuant to an offer of settlement in which AlphaBit Trading, LLC (“AlphaBit”) neither admitted nor denied the rule violations upon which the penalty is based, on June 13, 2018, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“BCC” or “Panel”) found that on several dates between December 1, 2015, and June 30, 2016, a trader then employed by AlphaBit entered and canceled multiple layered orders in CME Live Cattle and Lean Hog spread futures markets on the Globex electronic trading platform without the intent to trade, but rather, to encourage market participants to trade opposite the smaller orders he had entered that were resting on the opposite side of the order book. After receiving a fill on the smaller order, the trader canceled the layered orders.  

The Panel further found that on multiple dates between January 7, 2015, and August 24, 2015, the former employee entered orders in CME Live Cattle, Feeder Cattle and Lean Hog futures pre-open markets that were not entered for the purpose of executing bona fide transactions, but for the purpose of identifying internal position risk parameters or ascertaining market liquidity resting in the order book. The entry and cancellation of these orders caused fluctuations in the publicly displayed Indicative Opening Price. The Panel thus concluded that AlphaBit failed to provide sufficient training and failed to proactively monitor the employee to ensure that the employee conducted these trading activities in compliance with Exchange rules, in violation of Rule 432.W. 

PENALTY:

In accordance with the settlement offer, the Panel ordered AlphaBit to pay a fine of $25,000.  

EFFECTIVE DATE:

June 15, 2018