NOTICE OF DISCIPLINARY ACTION

MEMBER:

Edgehog LLC

CBOT RULE VIOLATIONS:

Rule CBOT Rule 433 Strict Liability for Acts of Agents (in part)

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.

CBOT Rule 575 Disruptive Practices Prohibited (in part)

All orders must be entered for the purpose of executing bona fide transactions. Additionally, all non-actionable messages must be entered in good faith for legitimate purposes.

D. No Person shall enter or cause to be entered an actionable or non-actionable message with intent to disrupt, or with reckless disregard for the adverse impact on, the orderly conduct of trading or the fair execution of transactions.

CBOT Market Regulation Advisory Notice, Advisory Number RA2006-5 (in part)

Question 22: Is the creation and execution of User Defined Spreads (“UDS”) for the purposes of deceiving or disadvantaging other market participants a violation of Rule 575?

Answer 22: Yes. Although the CME Globex system provides certain protections such as reasonability checks with respect to option deltas and the futures price on covered instruments, the UDS functionality requires users to exercise diligence and care in the creation of option spread instruments, including the creation of covered option strategies.

Market participants are reminded that knowingly creating and/ or trading UDS instruments in a manner intended to deceive or unfairly disadvantage other market participants is considered a violation of Rule 575.

FINDINGS:

Pursuant to an offer of settlement in which Edgehog LLC neither admitted nor denied the rule violations or factual findings upon which the penalty is based, on March 22, 2023, a Panel of the Chicago Board of Trade (“CBOT”) Business Conduct Committee (“Panel”) found that on numerous occasions from April 14, 2021, to April 30, 2021, Edgehog’s chief executive officer and an Edgehog employee, at the CEO’s direction, created and executed trades in covered User Defined Spreads (“UDS”) in various Soybean, Soybean Oil, Soybean Meal, Corn and Wheat futures contracts on the Globex electronic trading platform to receive beneficial over-allocations or under-allocations of futures contracts associated with the covered options instrument. As a result of the options gaming activity, Edgehog realized profits of $151,962.

The Panel concluded that as a result of the foregoing and pursuant to Rule 433, Edgehog violated CBOT Rule 575.D.

PENALTY:

In accordance with the settlement offer, the Panel ordered Edgehog to pay disgorgement of profits in the amount of $151,962.