CFTC Fines FCM for Failing to Diligently Supervise Its Employees and Correct Defective Software (with Lofchie Comment)

The CFTC alleged that the FCM had failed to diligently supervise the handling of a customer's commodity interest accounts. The Order found that the FCM had failed to aggregate a customer's multiple trading accounts held at the FCM when calculating that customer's feeder cattle futures speculative positions traded on the CME. Additionally, the Order stated that the FCM had relied on a faulty back-office software program which incorrectly calculated the aggregate futures equivalent net positions. The same faulty software was also used to identify potential speculative limit violations of its customer accounts. According to the Order, the FCM did not correct the defective program until six months after discovering the program's calculation error. &

Lofchie Comment: The imposition of a disciplinary action against a firm for not responding to a known failure in its technology is a fairly common occurrence. Firms are on notice that they should respond to technology failures as quickly as they would to employee misconduct.

See: CFTC Order against Vision; CFTC Press Release.