CFTC Penalizes FCM for Inaccurately Reporting Fixed Price Cash Position

The CFTC ordered a company and its affiliated futures commission merchant ("FCM") to pay a $1 million penalty for inaccurately reporting fixed price cash positions of agricultural commodities. The CFTC maintained that from January 2000 to May 2013, the FCM filed Form 204 reports that were consistently incorrect.

Under CFTC Rule 19.01, a bona fide hedger is allowed to exceed spot-month futures position limits if it is able to document the composition of its fixed-price cash position in the related commodities on the Form 204 report. In response to an inquiry from the CFTC, the company discovered that the employee it had tasked with obtaining trade data did not obtain updated numbers that would have reflected correct fixed-price cash positions. Specifically, the employee used a static fixed-price cash position number in preparing the Form 204 report which resulted in incorrectly stated fixed-price cash positions.