Disclosure of Futures Commission Merchant Material Conflicts of Interest

The purpose of this document is to provide you with information about some of the material conflicts of interest that may arise between you and CHS Hedging LLC. in connection with CHS Hedging LLC. performing services for you with respect to the futures, options on futures, swaps (as defined by the Commodity Exchange Act), forwards or other commodity derivatives (“Contracts”). Conflicts of interests can arise in particular when CHS Hedging LLC. has an economic or other incentive to act, or persuade you to act, in a way that favors CHS Hedging LLC. or its affiliates. 

Under applicable law, including regulations of the Commodity Futures Trading Commission (“CFTC”), not all swaps are required to be executed on an exchange or swap execution facility (each, a “Trading Facility”), even if a Trading Facility lists the swap for trading. In such circumstances, it may be financially advantageous for CHS Hedging LLC. or its affiliate to execute a swap with you bilaterally in the over-the-counter market rather than on a Trading Facility and, to the extent permitted by applicable law, we may have an incentive to persuade you to execute your swap bilaterally.   

Applicable law may permit you to choose the CFTC-registered derivatives clearing organization (“Clearing House”) to which you submit a swap for clearing. You should be aware that CHS Hedging LLC. may not be a member of, or may not otherwise be able to submit your swap to, the Clearing House of your choice. CHS Hedging LLC. consequently has an incentive to persuade you to use a Clearing House of which CHS Hedging LLC. or its affiliate is a member.

You also should be aware that CHS Hedging LLC. or its affiliate may own stock in, or have some other form of ownership interest in, one or more U.S. or foreign Trading Facilities or Clearing Houses where your transactions in Contracts may be executed and/or cleared.  As a result, CHS Hedging LLC. or its affiliate may receive financial or other benefits related to its ownership interest when Contracts are executed on a given Trading Facility or cleared through a given Clearing House, and CHS Hedging LLC would, in such circumstances, have an incentive to cause Contracts to be executed on that Trading Facility or cleared by that Clearing House. In addition, employees and officers of CHS Hedging LLC. or its affiliate may also serve on the board of directors or on one or more committees of a Trading Facility or Clearing House.

In addition, Trading Facilities and Clearing Houses may from time to time have in place other arrangements that provide their members or participants with volume, market-making or other discounts or credits, may call for members or participants to pre-pay fees based on volume thresholds, or may provide other incentive or arrangements that are intended to encourage market participants to trade on or direct trades to that Trading Facility or Clearing House. CHS Hedging LLC. or its affiliate may participate in and obtain financial benefits from such incentive programs. 

When we provide execution services to you (either in conjunction with clearing services or in an execution-only capacity), we may direct orders to affiliated or unaffiliated market-makers, other executing firms, individual brokers or brokerage groups for execution. When such affiliated or unaffiliated parties are used, they may, where permitted, agree to price concessions, volume discounts or refunds, rebates or similar payment in return for receiving such business. Likewise, where permitted by law and the rules of the applicable Trading Facility, we may solicit a counterparty to trade opposite your order or enter into transactions for its own account or the account of other counterparties that may, at times, be adverse to your interests in a Contract.  In such circumstances, that counterparty may make payments and/or pay a commission to CHS Hedging LLC. in connection with that transaction.  The results of your transactions may differ significantly from the results achieved by us for our own account, our affiliates, or for other customers. 

In addition, where permitted by applicable law (including, where applicable, the rules of the applicable Trading Facility), CHS Hedging LLC., its directors, officers, employees and affiliates may act on the other side of your order or transaction by the purchase or sale for an account, or the execution of a transaction with a counterparty, in which CHS Hedging LLC. or a person affiliated with CHS Hedging LLC. has a direct or indirect interest, or may effect any such order with a counterparty that provides CHS Hedging LLC. or its affiliates with discounts related to fees for Contracts or other products. In cases where we have offered you a discounted commission or clearing fee for Contracts executed through CHS Hedging LLC. as agent or with CHS Hedging LLC. or its affiliate acting as counterparty, CHS Hedging LLC. or its affiliate may be doing so because of the enhanced profit potential resulting from acting as executing broker or counterparty.

CHS Hedging LLC or its affiliate may act as, among other things, an investor, research provider, placement agent, underwriter, distributor, remarketing agent, structurer, securitizer, lender, investment manager, investment adviser, commodity trading advisor, municipal advisor, market maker, trader, prime broker or clearing broker. In those and other capacities, CHS Hedging LLC, its directors, officers, employees and affiliates may take or hold positions in, or advise other customers and counterparties concerning, or publish research or express a view with respect to, a Contract or a related financial instrument that may be the subject of advice from us to you. Any such positions and other advice may not be consistent with, or may be contrary to, your interests or positions which are the subject of advice previously provided by CHS Hedging LLC or its affiliate to you, and unless otherwise disclosed in writing, we are not necessarily acting in your best interest and are not assessing the suitability for you of any Contract or related financial instrument. Acting in one or more of the capacities noted above may give CHS Hedging LLC or its affiliate access to information relating to markets, investment and products. As a result, CHS Hedging LLC or its affiliate may be in possession of information which, if know to you, might cause you to seek to dispose of, retain or increase your position in one or more Contracts or other financial instruments. CHS Hedging LLC and its affiliate will be under no duty to make any such information available to you, except to the extent we have agreed in writing or as may be required under applicable law.