Key Takeaways
- • CME Group fined hedge fund traders Bernie Yu and Jeffrey Liu a combined $100,000 and ordered them to disgorge $247,048.12 in trading profits for engaging in disruptive trading practices on its Globex platform between November 3 and December 5, 2023.
- • The traders repeatedly created and executed User Defined Spreads linked to E-mini S&P 500 options and futures with quantities and delta levels designed to generate favorable over-allocations or under-allocations of futures contracts, violating CME Rules 575.D and 576.
- • Bernie Yu received a one-month suspension from all CME-owned trading floors and restricted access to CME-controlled designated contract markets, derivatives clearing organizations, and swap execution facilities, effective through September 28, 2026.
- • Yu was assessed the larger individual penalty of $55,000, while Liu paid $45,000; both traders were held jointly liable for disgorgement of the full $247,048.12 generated from the disruptive trading activity.
- • Neither trader admitted nor denied the rule violations as part of the settlement with CME's Business Conduct Committee, a standard resolution mechanism in regulatory disciplinary proceedings.
Summary
CME Group has concluded disciplinary proceedings against two hedge fund traders for engaging in systematic disruptive trading practices on its Globex electronic trading platform. The exchange levied fines totaling $100,000 against Bernie Yu and Jeffrey Liu and mandated the return of all profits generated through the prohibited trading strategy, amounting to $247,048.12.
The misconduct occurred between November 3 and December 5, 2023, when the traders repeatedly structured and executed User Defined Spreads connected to E-mini S&P 500 options and futures contracts. According to CME's disciplinary findings, their orders deliberately combined specific quantities and delta levels designed to produce favorable allocations or strategic under-allocations of futures contracts. This pattern of activity allowed the traders to extract profit from market dislocations rather than genuine price discovery.
Under the settlement approved by CME's Business Conduct Committee, Yu was fined $55,000 while Liu was ordered to pay $45,000. The pair were held jointly responsible for disgorging the entire $247,048.12 in trading profits stemming from the disruptive activity. The exchange also found that Yu had placed orders using operator identification credentials assigned to Liu, suggesting a coordinated execution strategy.
The violations breached CME Rules 575.D and 576, which govern disruptive trading practices and market conduct requirements. In addition to financial penalties, Yu faces a one-month suspension from access to CME-owned trading floors and all CME-controlled designated contract markets, derivatives clearing organizations, and swap execution facilities. This suspension extends through September 28, 2026. Liu's penalty did not include a trading suspension. Notably, neither trader admitted nor denied the alleged rule violations or CME's factual findings as part of the settlement, a standard approach in regulatory resolutions that does not constitute an acknowledgment of wrongdoing.
The misconduct occurred between November 3 and December 5, 2023, when the traders repeatedly structured and executed User Defined Spreads connected to E-mini S&P 500 options and futures contracts. According to CME's disciplinary findings, their orders deliberately combined specific quantities and delta levels designed to produce favorable allocations or strategic under-allocations of futures contracts. This pattern of activity allowed the traders to extract profit from market dislocations rather than genuine price discovery.
Under the settlement approved by CME's Business Conduct Committee, Yu was fined $55,000 while Liu was ordered to pay $45,000. The pair were held jointly responsible for disgorging the entire $247,048.12 in trading profits stemming from the disruptive activity. The exchange also found that Yu had placed orders using operator identification credentials assigned to Liu, suggesting a coordinated execution strategy.
The violations breached CME Rules 575.D and 576, which govern disruptive trading practices and market conduct requirements. In addition to financial penalties, Yu faces a one-month suspension from access to CME-owned trading floors and all CME-controlled designated contract markets, derivatives clearing organizations, and swap execution facilities. This suspension extends through September 28, 2026. Liu's penalty did not include a trading suspension. Notably, neither trader admitted nor denied the alleged rule violations or CME's factual findings as part of the settlement, a standard approach in regulatory resolutions that does not constitute an acknowledgment of wrongdoing.
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