• NOTICE OF DISCIPLINARY ACTION

      • #
      • 14-CH-1405
      • Effective Date
      • 24 February 2015
    • CHICAGO BOARD OF TRADE

      NOTICE OF DISCIPLINARY ACTION

      FILE NO.: 14-CH-1405

      MEMBER FIRM: Cunningham Commodities, LLC

      CBOT RULES: 

      930.E. CALLS FOR PERFORMANCE BONDS

      1. Clearing members must issue calls for performance bond that would bring an account up to the initial performance bond requirement: a) when performance bond equity in an account initially falls below the maintenance performance bond requirement; and b) subsequently, when performance bond equity plus existing performance bond calls in an account is less than the maintenance performance bond requirement. Such calls must be made within one business day after the occurrence of the event giving rise to the call. Clearing members may call for additional performance bond at their discretion. Notwithstanding the foregoing, a clearing member is not required to call for or collect performance bond for day trades.

      981. ANTI-MONEY LAUNDERING AND ECONOMIC SANCTIONS COMPLIANCE

      Each clearing member shall develop and implement a written compliance program approved in writing by senior management reasonably designed to achieve and monitor the clearing member’s compliance with all applicable requirements of the Bank Secrecy Act (31 U.S.C. § 5311 et seq.), the International Emergency Economic Powers Act (50 U.S.C. § 1701 et seq. ) (“IEEPA”), the Trading with the Enemy Act (50 U.S.C. App. § 1 et seq.) (“TWEA”), and the Executive Orders and regulations issued pursuant thereto, including the regulations issued by the U.S. Department of the Treasury and, as applicable, the Commodity Futures Trading Commission. That compliance program shall, at a minimum,

      1. Establish and implement policies, procedures and internal controls reasonably designed to assure compliance with all applicable provisions of the Bank Secrecy Act, IEEPA, TWEA, and all applicable Executive Orders and regulations issued pursuant thereto;

      2. Provide for independent testing for compliance to be conducted by clearing member personnel or by a qualified outside party;

      3. Designate an individual or individuals responsible for implementing and monitoring the day-to-day operations and internal controls of the program; and

      4. Provide ongoing training for appropriate personnel.

      982. RISK MANAGEMENT

      All clearing members must have written risk management policies and procedures in place to ensure they are able to perform certain basic risk and operational functions at all times. At a minimum, the following areas must be considered in the firm’s policies and procedures, depending on the firm’s size and its business and product mix:

      A. Trade Submission and Account Monitoring. Clearing members must have procedures in place to demonstrate compliance in the following areas for trades executed through both electronic platforms and open outcry:

      1. Monitoring the credit risks of accepting trades, including give-up trades, of specific customers.

      2. Monitoring the risks associated with proprietary trading.

      3. Limiting the impact of significant market moves through the use of tools such as stress testing or position limits.

      4. Maintaining the ability to monitor account activity on an intraday basis, including overnight.

      5. Ensuring order entry systems include the ability to set automated credit controls or position limits or requiring a firm employee to enter orders.

      6. Defining sources of liquidity for increased settlement obligations.

      B. Additional and/or Alternative Requirements. Exchange or Clearing House staff may prescribe additional and/or alternative requirements in order for clearing members to comply with this Rule.

      C. Each clearing member shall promptly provide to Clearing House staff, upon request, information and documents regarding its risk management policies, procedures and practices, including, without limitation, information and documents relating to the liquidity of its financial resources, settlement procedures and operational issues.

      D. Each clearing member shall make information and documents regarding its risk management policies, procedures and practices available to the CFTC upon the CFTC’s request.

      In addition, all FCM clearing members must comply with the risk management requirements set forth in CFTC Regulation 1.11: Risk Management Program for futures commission merchants.                                                                               

      FINDINGS: Pursuant to an offer of settlement in which Cunningham Commodities, LLC neither admitted nor denied the rule violations upon which the penalty is based, on February 20, 2015, the Clearing House Risk Committee found that Cunningham Commodities, LLC violated CBOT Rules 930.E.1., 981, and 982.

      PENALTY: In accordance with the settlement offer, the Clearing House Risk Committee fined Cunningham Commodities, LLC $50,000 effective February 24, 2015. After a subsequent examination, the Clearing House Risk Committee waived the fine at the April 28, 2016 meeting. 

      EFFECTIVE DATE: April 28, 2016