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CFTC fines processor for violating live cattle futures limits

CFTC fines processor for violating live cattle futures limits
Case brought in connection with CFTC’s Livestock Markets Task Force.

The Commodity Futures Trading Commission (CFTC) issued an order filing and settling charges against Sukarne SA de CV, a Mexico-based meat processor, for violating live cattle futures speculative position limits. The order requires Sukarne to pay a $35,000 civil monetary penalty. This case was brought in connection with CFTC’s Livestock Markets Task Force.

The order found that on June 23, 2020, Sukarne held a net short position of 500 contracts in the Chicago Mercantile Exchange (CME) June 2020 live cattle futures contract. This exceeded the spot month speculative position limit of 300 contracts established by CME.

CFTC’s investigation was conducted in conjunction with a related inquiry by CME, which also announced a disciplinary action against Sukarne. In determining its penalty, CFTC recognized that CME has imposed a $25,000 sanction on Sukarne for violating the exchange’s position limits rules, raising the total monetary penalty amount to $60,000.

In a concurring statement, CFTC commissioner Dan Berkovitz supported the CFTC sanction but did not agree with the civil monetary penalty. A few months ago, the CFTC Division of Enforcement publicly issued penalty guidance in which it stated its intent to “deter misconduct before it happens.” The division committed to deter misconduct by being “tough on those who break the rules while striving for fair and consistent outcomes in doing so.”

“In my view, today’s order does not accomplish either of these objectives. Sukarne held 500 live cattle futures contracts despite a spot month limit of 300 contracts — an excess of 200 contracts above the limit. At today’s prices, the $35,000 penalty is less than the cost of a single live cattle futures contract. A $35,000 penalty for such a violation thus represents a small fraction of the cost of doing business. It is neither sufficient to meaningfully deter future position limit violations, nor is it consistent with recent commission precedent involving similar facts,” Berkovitz said in his consent statement.

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