CBOT Fines Hertshten Group $95K for Pre-Open 'Looping' That Triggered Circuit Breakers in Fed F

Another prop trading firm caught manipulating pre-open futures pricing -- and this time the looping pattern triggered automated circuit breakers.

The Chicago Board of Trade has fined Hertshten Group Limited, a proprietary trading firm, $95,000 following a settlement over disruptive pre-open trading activity that caused price aberrations in multiple interest rate futures markets.

What Happened

CBOT's Business Conduct Committee found that Hertshten Group and analysts at its India-based subsidiary engaged in repeated "looping" messaging patterns during pre-open periods on at least three separate occasions in 2024:

• July 9, 2024: Looping messages contributed to an aberrant Indicative Opening Price, triggering a Velocity Logic Dynamic Circuit Breaker in March 2025 30 Day Federal Funds futures
• July 25, 2024: Same pattern in December 2024 One-Month SOFR futures, forcing CME's Global Command Center to adjust prices. Implied-order functionality cascaded the aberration into three additional markets
• December 10, 2024: Again in March 2025 30 Day Federal Funds futures, triggering another circuit breaker

The firm neither admitted nor denied the violations. The $95,000 fine was split between CME ($40,000) and CBOT ($55,000).

The Pattern: Pre-Open Manipulation via Automated Messaging

This is the second CME disciplinary action against a prop trading firm in recent weeks. Earlier this month, Tanius Technology was fined $150,000 for entering oversized Treasury futures orders during roll periods, exploiting pro-rata matching to gain disproportionately large fills.

Both cases share a common thread: algorithmic strategies designed to exploit exchange mechanics during periods of thin liquidity. Pre-open sessions and roll periods are particularly vulnerable because order books are building and price discovery is fragile.

Why This Matters for Traders

• If you trade the open, your fills in rate futures may have been directly affected by this activity. The Velocity Logic circuit breakers exist specifically to catch these aberrations, but the fact that CME's Global Command Center had to manually intervene and adjust prices means the damage was real
• Cascading impact: Because of CME Globex implied-order functionality, price aberrations in one contract can ripple across related markets. The July 25 incident hit four total markets
• Supervision failures: CBOT found Hertshten Group also violated supervision rules (Rule 432.W) -- the firm failed to prevent its analysts from engaging in the disruptive activity. This is a warning to every prop firm with remote trading desks: you own your traders' behavior
• The enforcement trend is real: CME has been increasingly aggressive with disciplinary actions. Last week they suspended and fined NYMEX broker Kevin Milan $40K for leaking crude oil order info

Rules Violated

• CBOT Rule 432.W -- Failure to supervise
• CBOT Rule 432.Q -- Conduct detrimental to the exchange
• CBOT Rule 575.D -- Disruptive practices (entering messages with reckless disregard for adverse market impact)

Source: CME Group Notice of Disciplinary Action | Finance Magnates