In re Ag Processing Inc. A Cooperative
Commodity Futures Trading Commission
CFTC Docket No. 21-02 (2021)
- Written by Brett Stavin, JD
Facts
Ag Processing Inc. (AGP) (defendant), a cooperative, was engaged in the processing of soybean meal and crude soybean oil. To hedge against the risk of supply cost increases, AGP took positions in soybean-meal futures on the Chicago Board of Trade. The Commodity Futures Trading Commission (CFTC) (plaintiff), through CFTC regulation 150.2, established position size limits for soybean-meal futures. There were separate limits for spot months, otherwise described as the futures contracts next to expire, and all-months, meaning the sum of all futures contracts held. Although positions held for the purposes of bona fide hedging could be exempt from the position-limit regulations, the hedger had to seek authorization from the CFTC and disclose its positions to the CFTC in a Form 204. AGP accumulated positions in soybean-meal futures that exceeded the all-months limit under CFTC regulation 150.2. Although AGP sought and obtained authorization from the designated contract market to exceed its internal position size limits, AGP did not seek or obtain authorization from the CFTC. At various times in the period of December 2017 through July 2019, AGP exceeded the all-months position limit by between 63 and 1,357 futures contracts. The CFTC formed the belief that AGP’s actions constituted a violation of § 4a(b)(2) of the Commodity Exchange Act (CEA) and CFTC regulation 150.2. Instead of proceeding in adversarial litigation, AGP submitted an offer of settlement, which the CFTC accepted. AGP fully cooperated with the CFTC and later obtained authorization for future hedging exemptions.
Rule of Law
Issue
Holding and Reasoning (Per curiam)
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