A Hong Kong-based hedge fund settled CFTC charges for exceeding the spot month speculative position limit for soft red winter wheat futures contracts.
In a related action, the Chicago Mercantile Exchange ("CME") Business Conduct Committee ordered the hedge fund to pay $166,590 for failing to adequately supervise its employees and agencies.
The CFTC recognized the CME's fine when determining its penalty and settled with the hedge fund for $160,000.
Commentary / Bob Zwirb
Trading firms that acquire large positions should be aware of the fact that under CFTC case law, a violation of the CFTC's position limit rules is essentially a strict liability offense. Or as the settlement order emphasizes: "The Commission does not need to establish scienter—i.e., proof of intent to exceed the applicable speculative position limit—in order to prove a violation of the Commission's speculative position limit provisions. . . [Section 4a(e) of the CEA] 'unambiguously imposes liability' for violations of speculative position limits."
(Citing Saberi v. CFTC, 488 F.3d 1207, 1212 n.4 (9th Cir. 2007).
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