NOTICE OF DISCIPLINARY ACTION

NON-MEMBER:

CHALLENGER LIFE COMPANY LIMITED

NYMEX RULE VIOLATION:

562. POSITION LIMIT VIOLATIONS (in part)

Any positions in excess of those permitted under the rules of the Exchange shall be deemed position limit violations.

CME GROUP RA2117-5

Q4: Do deliveries in physically-delivered metals contracts impact the futures position in the spot month for purposes of compliance with spot month position limits?

A4: Effective for the April 2021 contracts and beyond, in physically-delivered metals contracts, the spot month position limit will be applied and enforced separately for futures and for deliveries during the spot month. For example, the Gold futures contract has a spot month position limit of 6,000 contracts and no person may hold more than 6,000 Gold futures contracts (on a net futures-equivalent basis) during the spot month unless they have received a hedge exemption from the Exchange. Separately, a participant may not make (issue) or take (stop) delivery of more than 6,000 net futures-equivalent contracts during the spot month unless they have received a hedge exemption from the Exchange. If a person stops certificates for delivery in a quantity that would cause such person to exceed the certificate limit, the person must retender the quantity of certificates in excess of the limit no later than the close of business on the following business day. Failure to do so constitutes a position limit violation. Given that the spot month limit is applied separately for futures and for deliveries, no netting between futures and deliveries is permitted.

FINDINGS:

Pursuant to an offer of settlement in which Challenger Life Company Limited neither admitted or denied the Rule violation or factual finding upon which the penalty is based, on December 13, 2022, a Panel of the New York Mercantile Exchange Business Conduct Committee (“Panel”) found that on March 30, 2022, Challenger held a position in April 2022 Platinum Futures (“APR22 PL”) of 874 contracts, which was 374 contracts, or 74.8%, over the position limit. APR22 PL position limits went into effect at the close of business on March 30, 2022, and remained in effect until April 28, 2022.

Additionally, on March 30, 2022, which was the first notice date for the delivery of APR22 Platinum futures contracts, Challenger was stopped for delivery on 700 contracts, but failed to retender the 200 certificates in excess of the delivery limit by the close of the next business day. On March 31, 2022, Challenger was stopped for delivery on an additional 72 contracts of APR22 PL and failed to retender the excess 72 certificates by the close of the next business day, which increased its long deliveries to 772 contracts. As a result, Challenger violated the APR22 PL standard expiration month delivery limit of 500 contracts by 272 contracts.

Further, the May 2022 Platinum futures (“MAY22 PL”) position limit went into effect at the close of business on April 28, 2022, and remained in effect until the termination of trading on May 27, 2022. Between April 29, 2022, and May 9, 2022, Challenger issued 536 contracts of MAY22 PL, thereby violating the MAY22 PL standard expiration month delivery limit of 500 contracts by 36 contracts.

The Panel found that, as a result, Challenger violated Rule 562.

PENALTY:

In accordance with the settlement offer, the Panel ordered Challenger to pay a fine to the Exchange in the amount of $60,000.