• 19-CH-1902

      • #
      • 19-CH-1902
      • Notice Date
      • 23 August 2019
      • Effective Date
      • 23 August 2019
    • Board of Trade of the City of Chicago, Inc.
      NOTICE OF DISCIPLINARY ACTION

      FILE NO.: 19-CH-1902

      MEMBER FIRM: Cunningham Commodities, LLC

      CBOT Rules: 930. PERFORMANCE BOND REQUIREMENTS: ACCOUNT HOLDER LEVEL
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      930.E. Calls for Performance Bond
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      2. Clearing members shall only reduce a call for performance bond through the receipt of performance bond deposits permitted under subsection C. of this rule. Clearing members may cancel a call for performance bond through: a) the receipt of performance bond deposits permitted under subsection C. of this rule only if such deposits equal or exceed the amount of the total performance bond call; or b) inter-day favorable market movements and/or the liquidation of positions only if performance bond equity in the account is equal to or greater than the initial performance bond requirement. Clearing members shall reduce an account holder's oldest outstanding performance bond call first.
      * * * *
      930.F. Release of Excess Performance Bond

      Subject to exceptions granted by Clearing House staff, clearing members may only release performance bond deposits from an account if such deposits are in excess of initial performance bond requirements.

      FINANCIAL REQUIREMENTS AND FINANCIAL EMERGENCIES
      970. FINANCIAL REQUIREMENTS

      A. Subject to exemptions granted by Exchange staff, all clearing members, including non-FCMs, must comply with the requirements set forth in CFTC Regulations 1.10, 1.12, 1.17 and 1.18. This includes, but is not limited to, the following:
      * * * *
      4. Completely and accurately computing and recording the balances in the net capital computation including capital requirements;

      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 August 22, 2019, the Clearing House Risk Committee found that Cunningham Commodities, LLC violated CBOT Rules 930.E.2., 930.F., 970.A.4. and 982.

      PENALTY: In accordance with the settlement offer, the Committee imposed a $50,000 fine.

      EFFECTIVE DATE: August 23, 2019