theICE US Futures issued a Disciplinary Notice in Case 2020-018 (notice here). The firm accepting the settlement had an existing spread exemption granted by the exchange. However, the notice indicates that the firm did not comply with the terms of the spread exemption during the spot month period "numerous instances" between November 2019 and June 2021 when it held positions in the Henry Hub LD1 contract in excess of the spot month limit. They noted that the company did not have adequate policies and processes in place to monitor "its positions or its compliance with the spread exemption". The company also didn't comply adequately with staff data requests.
We have the trifecta here - trading against an hedge exemption without actually having a valid basis for the exemption at the time the trades were in excess of the position limit, not monitoring the positions and compliance with the terms of the hedge exemption, and not responding adequately to an exchange inquiry.
DCM has written over and over again that a hedge exemption from an exchange is not "carte blanche" to trade up to the limit under any and all circumstances. It IS an opportunity to trade in excess of the position limit up to the exemption IF:
1. You can confirm that your current actions and supporting positions are such that the exemption, as seen through your CURRENT supporting positions, justifies exempting the excess position.
2. You actually have to the ability to monitor that what the underlying circumstances are and whether they comply with the exemption. If your current supporting positions support a lower exemption, then the lower exemption is what you are entitled too - not what is stated as the maximum in the exemption.
Finally, any company that feels it has the resources and capability to stall out an exchange inquiry just is wasting their time, their shareholders money on even more outside counsel fees, and, in the end, will pay even more fines. If they are asking you questions, tell them the truth and tell it up front. You are allowed to tell your version of the truth but that version can't include hiding facts.