The Chicago Mercantile Exchange ("CME") Business Conduct Committee ("BCC") charged a firm for exceeding the spot month position limit in September 2017 corn futures contracts ("SEP17 Corn").
According to the BCC's findings, the firm AWH Financial LLC ("AWH") held a Net Futures Equivalent long position of 1,200 SEP17 Corn on August 30, 3017, which exceeded the permissible limit of 600 contracts. The following day, AWH allegedly sold September 2017 - December 2017 Corn futures calendar spreads and SEP17 Corn futures outrights. Although the AWH suffered a loss on its overall SEP17 Corn position, the BCC determined that the firm still benefited from the violation by avoiding additional losses.
The BCC ordered AWH to pay a $25,000 fine and disgorge $53,562.50.
Commentary / Bob Zwirb
The BCC's calculation of a monetary sanction here, which involves both a penalty and disgorgement, and its careful analysis in support of that calculation represent one of the better efforts by a regulator on this measure. While an outsider cannot tell all that went into the two assessments, they appear to have been designed to deprive the respondent of any gain wrongfully obtained (here in the form of a loss avoided) as well as to deter future wrongdoing. That is far better than the standard employed by the CME's overseer, the CFTC, which considers "a long list of largely subjective or non-quantifiable factors as part of its 'facts and circumstances' approach to penalty assessment," and "relegates [economic-based principles such as] deterrence to but one of many factors for determining the gravity of a violation." (See In re Staryk).
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