I support the Commission’s Order sanctioning Sukarne for exceeding the Chicago Mercantile Exchange’s spot month position limit in the June 2020 live cattle futures contact (Order).  This action reflects the CFTC’s commitment to monitoring derivatives trading, particularly in markets such as livestock futures that are experiencing historic volatility.  Where appropriate, the Commission will enforce federal and exchange-set position limits, which are critical to prevent unwarranted price volatility and market manipulation. 

I do not agree, however, with the civil monetary penalty imposed by the Commission in this case.  A primary purpose for imposing sanctions for violations of the Commodity Exchange Act (Act) is to deter market participants from committing similar violations.  See, e.g., Reddy v. CFTC, 191 F.3d 109, 123 (2d Cir. 1999) (citing In re Miller, CFTC No. 92–4, 1998 WL 107577, at *6 (Mar. 12, 1998)); Miller v. CFTC, 197 F.3d 1227, 1236 (9th Cir. 1999); In re Crossfeld, CFTC No. 89-23, 1996 WL 709219, at *12-13 (Dec. 10, 1996) (“[C]ivil money penalties should be sufficiently high to deter future violations, that is, to make it beneficial financially for a respondent to comply with the requirements of the Act and Commission regulations rather than risk violations.”) (quotations and alterations omitted). 

A few months ago, the CFTC’s Division of Enforcement publicly issued penalty guidance, in which it stated its intent to “deter misconduct before it happens.”  Civil Monetary Penalty Guidance, CFTC Rel. No. 8165-20 (May 20, 2020), available at https://www.cftc.gov/PressRoom/PressReleases/8165- 20.  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.  See, e.g., In re Elephas Invest. Mgmt. Ltd., CFTC No. 19-09, 2019 WL 2903308 (July 2, 2019) (imposing $160,000 civil monetary penalty for one-day inadvertent violation of spot month position limit in soft red winter wheat futures contract).