Lessons For FCM Risk Managers From A Recent CFTC Enforcement Settlement

Recently the CFTC settled an administrative proceeding with an FCM that FCM risk managers will want to examine closely.

The settlement relates to allegations (among others) that the FCM violated CFTC Rules 1.11 and 1.73. Specifically, the CFTC alleged and settled allegations that the FCM had violated requirements under Rule 1.11 that an FCM (i) establish, maintain, and enforce a risk management program consisting of risk management policies and procedures designed to monitor and manage the risks associated with the activities of the FCM; and requirements under Rule 1.73 that an FCM that is also a clearing member of a derivatives clearing organization (ii) establish risk-based limits in each customer account based on position size, order size, margin requirements, or similar factors (and, if the clearing FCM provides electronic market access to customers, the FCM must use automated means to screen orders for compliance with those risk-based limits).