I had the opportunity to speak at a Risk.Net training for energy firm surveillance last week. As an aside, Sean Collins from FERC Analytics and Surveillance was the initial speaker and the attendees appreciated his information on the FERC program. I would recommend anyone in the US natural gas or power trading space take any opportunity to hear him speak.
One of the points attendees always react to is the exchange's practice of assessing fines for failure to supervise. A company is responsible for their staff being adequately trained and motivated to follow exchange market compliance rules. These are not always the more prominent "spoofing" or manipulation cases - these are often reporting or business process rules.
In last week's notice, the fine came from failure to train and oversee the staff. The violation arises under the "General Offenses" Rule for the CME - Rule 432, specifically:
"W. for any party to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange."
This was a case of failing to properly onboard clients and, in noted cases, allowing brokers to tell traders to backdate onboarding papers to be able to trade before the papers had cleared.
The firm was fined $75K - split between two CME exchanges. The notice is at https://www.cmegroup.com/notices/disciplinary/2018/09/COMEX-16-0486-BC-2-ZERICH-SECURITIES-LIMITED.html#pageNumber=1
Training and oversight are not just a check the box - they are important controls.