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Commodity Futures Trading Commission 

CEA CASES 

NAME: MYLES J. KERRIGAN 

CITATION: 33 Agric. Dec. 1242 

DOCKET NUMBER: 209 

DATE: MAY 1, 1974 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 16,019) 

In re MYLES J. KERRIGAN. CEA Docket No. 209. Decided May 1, 1974. 

Speculative trading -- exceeding limits in, in corn futures -- negligent 

actions -- Sanction

Where respondent, an experienced trader, acted negligently in exceeding the 

maximum daily trading limits in corn futures as found herein, respondent is 

ordered to cease and desist from such violations, and respondent is denied 

trading privileges on all contract markets for a period of 30 days. 

Darrold A. Dandy, for complainant. 

John J. Enright, Chicago, Ill., for respondent. 

Decision by John A. Campbell, Administrative Law Judge.

DECISION AND ORDER

PRELIMINARY STATEMENT

This is a disciplinary proceeding under the Commodity Exchange Act (7 U.S.C., 

Chapter 1), hereafter referred to as the "Act", which was instituted by a 

complaint issued by the Assistant Secretary of Agriculture on March 8, 1973. 

The complaint alleges that the respondent, Myles J. Kerrigan (a member of the 

Chicago Board of Trade, which is a duly designated contract market under the 

Act), on December 1, 1972, violated the speculative daily trading limits in corn 

futures fixed by the Commodity Exchange Commission (hereafter called the 

"Commission") by buying a total of 3,155,000 bushels and selling a total of 

3,315,000 bushels on the Chicago Board of Trade. The complaint further alleges 

that all such transactions were speculative, were made for the account of 

respondent, and were in violation of section 4a of the Commodity Exchange Act (7 

U.S.C. 6a) and section 150.11 of the Orders of the Commission (17 C.F.R. 

150.11). 

On March 23, 1973, respondent filed an answer to the complaint which admitted 

the jurisdictional allegations of the complaint and the December 1, 1972 trades 

in excess of the speculative daily trading limits in corn futures. Respondent's 

answer further alleges that the instance complained of was an innocent error or 

mistake, that upon discovering the error he immediately ceased trading, and that 

he reported his trading accurately to the Commodity Exchange Authority without 

attempting to conceal the fact that his trading had exceeded the daily 

speculative trading limits for that day. 

Thereafter the complaint was amended on July 11, 1973 at the hearing to 

specifically add "willful" in paragraph V. Respondent denied the amended 

allegation. (Tr. pp. 5-10). 

An oral hearing was held before me on July 11 and 12, 1973, in Chicago, 

Illinois. On February 19, 1974 the record was supplemented through stipulation 
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of the parties. The respondent was represented by John J. Enright, of the law 

firm of Arvey, Hodes, and Mantynband, Chicago, Illinois. Darrold A. Dandy and 

Earl L. Saunders, Office of the General Counsel, United States Department of 

Agriculture, Washington, D.C. appeared as counsel for complainant. 

FINDINGS OF FACT

1. Myles J. Kerrigan, an individual whose address is Room 2300, 141 West 

Jackson Blvd., Chicago, Illinois 60604, is now and was at all times material 

herein a member of the Board of Trade of the City of Chicago (hereafter called 

the Chicago Board of Trade). (Pleadings) 

2. The Chicago Board of Trade is now, and was at all times material herein, a 

duly designated contract market under the Act. (Pleadings) 

3. The transactions involved herein were in corn futures on or subject to the 

rules of the Chicago Board of Trade and all such transactions were speculative 

and made for the account of respondent. (Pleadings) 

4. On December 1, 1972, Myles J. Kerrigan violated the speculative daily 

trading limits in corn futures fixed by the Commission (3,000,000 bushels) by 

buying a total of 3,155,000 bushels and selling a total of 3,315,000 bushels on 

the Chicago Board of Trade. (Pleadings, Exhibits CX-1, CX-2, CX-3, Hearing 

transcript pages [hereinafter designated Tr.] 16-49, 240A-240). 

5. On December 4 and 6, 1972, Myles J. Kerrigan filed with the Commodity 

Exchange Authority reports on CEA Form 203, covering his transactions in corn 

futures on the Chicago Board of Trade for December 1, 1972. Such reports show 

that the respondent exceeded the daily speculative trading limits established by 

the Commission. (Exhibit CX-1, CX-2, Tr. 17-30). 

6. On December 1, 1972, the respondent, knew and at all times was aware that 

the maximum amount which any person may buy and the maximum amount which any 

person may sell, of corn, during any one business day, as set by the Commission, 

was 3,000,000 bushels in all futures combined. (Tr. 260). 

7. According to the respondent, he routinely keeps a running tally of his 

trading volume by transferring the totals (buy and sell) from his trading cards 

to a blank trading card which he keeps in his hand. On such blank trading card 

he accumulates the totals from the day's trading cards as he completes them and 

adds them to his running total. (Respondent's Answer, RX-1, RX-2, 226-240). 

8. Respondent's trading cards are picked up periodically during the course of 

the day and carried to the offices of O'Connor Grain Co. for the purposes of 

entering his trades on the books and clearing them. Respondent retains his 

trading card showing his running total. (Respondent's Answer, Tr. 217-219, 223-

225). 

9. After being picked up on the floor of the exchange, the respondent's 

trading cards and those of several other traders are numbered by a clerk of 

O'Connor Grain Co., starting with the number "1" and continuing consecutively to 

the end of the trading session regardless of whose trading cards they are. The 

earliest trading cards picked up get numbered first and the latter numbered with 

higher numbers. (Tr. 46-47, 217-219, 223-225). 

10. The respondent testified that he became suspicious that his running tally 

of trading volume was lower than his actual trading volume at about 11:45 or 

11:50, but before 12:00 noon. When he became suspicious that his running total 

of trading volume was in error, he telephoned O'Connor Grain Co., from the floor 

of the Exchange and said, "I think I'm getting close to the limit and I lost my 

count." He then asked for his totals (bought and sold) from the trading cards 

which he had already turned in to O'Connor Grain Company at approximately 11:30 

a.m. (Respondent's Answer, Tr. 240-241, 266). 
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11. Examination and verification of trades shown on Mr. Kerrigan's trading 

card number 90 indicate that respondent's last trade in corn on December 1, 

1972, took place between 12:02:20 and 12:03:00 (Tr. 61-62, Stipulation). 

12. The volume of trading in corn futures on the Chicago Board of Trade on 

Friday, December 1, 1972, was 99,690,000 bushels and 62,585,000 bushels on 

November 30, 1972. The average volume of trading in corn futures on the Chicago 

Board of Trade for the month of November was 49,482,000 bushels, with 28,575,000 

bushels being the lowest daily volume for the month, as reported on November 3, 

1972, and the highest daily volume being 74,750,000 bushels as reported on 

November 16, 1972. The average daily volume of trading in corn futures on the 

Chicago Board of Trade for the month of December was 93,540,000 with the largest 

daily volume of 147,980,000 bushels being reported on December 11, 1972, and the 

lowest daily volume of 24,165,000 bushels being reported on December 26, 1972. 

(Exhibits CX-21, 22; Tr. pp. 240, 294-300). 

13. On April 28, 1965, the Chicago office of the Commodity Exchange 

Authority, sent a letter to respondent confirming a prior telephone conversation 

informing the respondent that he had exceeded the 2,000,000 bushel speculative 

daily trading limit in all soybean futures combined on the Chicago Board of 

Trade on April 26, 1965, as revealed by respondent's 203 report. This letter 

also called to respondent's attention the section of the Order of the Commission 

which established for soybeans a speculative daily trading limit of 2,000,000 

bushels. Also attached to such letter was a copy of a guide sheet: "Speculative 

Limits on Trading and Positions Under the Commodity Exchange Act." The purpose 

of the April 28, 1965, letter was to apprise the respondent of the daily 

speculative trading limits so that he could avoid any future incidents of 

exceeding the speculative limits established by the Commission. (Exhibit CX-8, 

Tr. 94-97). 

14. On June 19, 1969, a complaint and notice of hearing was issued in CEA 

Docket No. 162, charging among other things, that respondent exceeded the daily 

speculative trading limits in corn futures on five separate days in June and 

July, 1966, and that he further attempted and did, for a period of time, conceal 

such violations by filing false reports with the Commodity Exchange Authority 

and by having another trader enter a portion of his trades on that other 

trader's trading cards. On September 19, 1969, respondent filed an Answer to 

the above charges in which 

he admitted that he did exceed the daily speculative trading limits as charged 

in the complaint. An oral hearing was conducted in the matter on October 15, 

1969 and.thereafter on October 17, 1969 respondent filed a stipulation in which 

he admitted jurisdiction, factual allegations (for purposes of that proceeding) 

and consented to the entry of the order. On October 23, 1969 an order was 

issued by the Judicial Officer (28 Agric. Dec. 1239 (28 A.D. 1239)) suspending 

the registration of respondent as a floor broker for a period of 30 days and 

denying trading privileges to him for a like period of time. (Exhibit CX-7) 

15. On March 3, 1967, respondent filed with the Commodity Exchange Authority 

a report on CEA Form 203 covering his transactions in corn futures on the 

Chicago Board of Trade for March 2, 1967, which shows that the respondent 

exceeded the daily speculative trading limits established by the Commission. 

Respondent further acknowledged such transactions in a letter dated March 3, 

1967. Respondent was apprised of the daily speculative trading limits so that 

he could avoid any future instances of exceeding the speculative limits 

established by the Commission. (Exhibits CX-7, CX-9, CX-12, Tr. 103-109). 

16. On April 5, 1968 and January 13, 1969, respondent filed with the 

Commodity Exchange Authority reports on CEA Form 203 covering his transactions 

in corn futures on the Chicago Board of Trade for April 4, 1968 and January 10, 

1969, which state that the respondent exceeded the daily trading limits 

established by the Commission. Such violations were not drawn to respondent's 

attention because the matter covered in CEA Docket No. 162 had not been 

concluded at the time of these violations and because it is a policy of the 
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Commodity Exchange Authority not to contact the individual trader under these 

circumstances. (Exhibit CX-10, CX-11, Tr. 103-109). 

CONCLUSIONS

Respondent, as alleged in the complaint and as admitted in his answer, 

exceeded the speculative daily trading limits in corn futures fixed by the 

Commission by buying a total of 3,155,000 bushels and selling a total, of 

3,315,000 bushels in violation of section 4a of the Act (7 U.S.C. 6a) and 

section 150.11 of the orders of the Commission. (17 C.F.R. 150.11) 

Section 4a of the Act reads in part as follows: 

(1) Excessive speculation in any commodity under contracts of sale of such 

commodity for future delivery made on or subject to the rules of contract 

markets causing sudden or unreasonable fluctuations or unwarranted changes in 

the price of such commodity, is an undue and unnecessary burden on interstate 

commerce in such commodity. For the purpose of diminishing, eliminating, or 

preventing such burden, the Commission shall, from time to time, after due 

notice and opportunity for hearing, by order, proclaim and fix such limits on 

the amount of trading which may be done or positions which may be held by any 

person under contracts of sale of such commodity for future delivery on or 

subject to the rules of any contract market as the Commission finds are 

necessary to diminish, eliminate, or prevent such burden . . . Nothing in this 

section shall be construed to prohibit the Commission from fixing . . . . 

different limits for purposes of subparagraphs 2(A) and (B) of this section, or 

from exempting transactions normally known to the trade as "spreads" or 

"straddles" or from fixing limits applying to such transactions or positions 

from limits fixed for other transactions or positions. 

(2) The Commission shall in such order fix a reasonable time (not to exceed 

ten days) after the order's promulgation; after which, and until such order is 

suspended, modified, or revoked, it shall be unlawful for any person -- 

(A) directly or indirectly to buy or sell, or agree to buy or sell, under 

contracts of sale of such commodity for future delivery on or subject to the 

rules of the contract market or markets to which the order applies, any amount 

of such commodity during any one business day in excess of any trading limit 

fixed for one business day by the Commission in such order for or with respect 

to such commodity; . . . * 

* This section of the Act was construed by the Court in: Corn Products 

Refining Co. v. Benson, 232 F.2d 554, 560 (C.A. 2, 1956). 

Pursuant to such authority the Commission has issued section 150.11 which 

establishes daily trading limits in corn for future delivery. (17 C.F.R. 

150.11) This section provides in pertinent part that: 

(B) Daily trading limit. The limit on the maximum amount which any person 

may buy, and on the maximum amount which any person may sell, of corn, on or 

subject to the rules of any one contract market during any one business day is 

3,000,000 bushels in any one future or in all futures combined. * 

* Prior to June 26, 1971, the daily speculative trading limits in corn 

futures was 2,000,000 bushels. 

The principle issue in this proceeding is whether the trading limit violation 

of section 4a of the Act and section 150.11 of the orders of the Commission was 

a simple mistake as respondent contends or whether the violation was willful as 

complainant 

contends. The decisive facts in this proceeding are not in dispute and 

resolution of the issue boils down to this: Respondent shortly before noon on 
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December 1, 1972 suspected that he was close to or over the trading limits. In 

spite of such suspicion he nevertheless executed his last trade between 12:02 

and 12:03 p.m. This action by respondent was not a mistake but instead was a 

careless disregard of the statutory requirements. See: In re David G. Henner,

30 Agric. Dec. 1151, 1161-1162, 1261-1262 (30 A.D. 1151, 1161-1162, 1261-1262); 

In re Economou and Economou & Co., 32 Agric. Dec. 14, 98-99 (32 A.D. 14, 98-99), 

Appeal pending; and Butz v. Glover Livestock Comm'm Co., 411 U.S. 182, 187 FN.5. 

The findings of fact demonstrate that the respondent was well informed of the 

daily speculative limits established for trading in corn. The daily speculative 

trading limits had been repeatedly drawn to his attention; first in April of 

1965, then in March of 1967, and more forcefully in the proceeding in CEA Docket 

No. 162. 

Respondent is an experienced trader, and the inference is inescapable that he 

acted negligently or with careless disregard of the maximum daily trading limits 

by purchasing a total of 3,155,000 bushels and selling a total of 3,315,000 

bushels in corn futures on December 1, 1972 after he became suspicious that his 

running tally of his trading volume was lower than his actual trading volume. 

Complainant's reply brief contends further (footnote 1) that a legal 

conclusion concerning willfulness is not necessary to support the relief sought 

by complainant. Complainant states that the provisions of the Administrative 

Procedure Act (5 U.S.C. 558(c)) and section 0.3(c) of the Rules of Practice 

under the Act (17 C.F.R. 0.3(c)) do not apply to an order denying trading 

privileges to a person who is not registered under the Act. Since respondent 

was not a registered floor broker on December 1, 1972 (footnote 9, reply brief) 

this contention has merit in the light of the Judicial Officer's holding in 

Economou, supra at page 131, and in In re George Rex Andrews, 32 Agric. Dec. 

553, 583 (32 A.D. 553, 583). 

II 

It is believed that the sanction imposed herein, although different from that 

sought by complainant, is appropriate considering the facts in this case, the 

testimony reflecting the expertise of the Agency, and the guidelines set forth 

by the Judicial Officer in several recent decisions. 

Based on the record evidence we would impose the following 

sanction: (1) An order to cease and desist, and (2) A thirty-day denial of 

trading privileges. 

We consider this sanction appropriate for several reasons. First it appears 

from the record evidence that respondent's action, although negligent, was not 

deliberate. (Tr. 63-64, 88). In adding the total trades appearing at the 

bottom of trading cards contained in Exhibit CX-3, it appears that respondent 

traded in excess of the limits at a point in time immediately after cards 1 

through 11 were picked up by a member of respondent's office (Tr. p. 224). The 

total trades per cards 1 through 11 indicate 2,915,000 bushels bought, and 

2,840,000 bushels sold. After these eleven cards were picked up respondent 

executed further trades on card 46. At that point he was over the limits with 

total trades of 3,010,000 bought and 3,050,000 sold. 

This we believe lends credence to respondent's contention that he failed to 

fully record the trading card totals onto his blank tally card and lost count 

after the trading cards were picked up. 

Respondent testified that he exercised care in his trading practices since 

the prior consent order of October 1969 * (which involved a cluster of 

violations, many of which were far more serious than the present violation), 

particularly in the use of the blank cards to reflect his daily total trades 

(Tr. pp. 228-229, 238-240, 245, 251-253). This we believe is supported by the 

three year time span in which respondent remained in compliance with the trading 

limits. 
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* CEA Docket No. 162 

Complainant introduced at the hearing a series of statistical reports (CX-13, 

14, 15, 16, 17, 18) to show instances of violations of the daily speculative 

trading limits in corn futures. The reports indicate 18 instances where one or 

more violations were discovered and that four such violations involved 

respondent. In view of the large number of respondent's previous violations it 

is doubtful that respondent's record of violations (depending on how they are 

counted) will ever be equalled or exceeded by anyone else. 

The fact remains however that all of the four violations counted in the 

statistics are past violations which were considered by complainant, in the 

disposition of CEA Docket No. 162, and that respondent, thereafter remained in 

compliance with the trading limits until December 1, 1972. 

In particular the record discloses: that respondent is a floor trader (a 

spreader) who speculates for his own account, and whose presence in the market 

place provides market liquidity; that the main purpose of the trading limits is 

to reduce the availability of trading power to persons who by the very weight of 

their accumulated transactions, affect the direction of prices for commodity 

futures; that the "spreader" is less likely to produce such an undesirable 

economic result; that respondent's trades based upon an examination of CX-3 were 

characterized at the hearing as "the lesser of the things we are trying to 

accomplish by limits"; and that respondent's trading had less impact on the 

market prices than a sustained trade in one direction. (Tr. pp. 73, 144-147, 

149, 221, 230-231). 

The record also shows that trading on December 1, 1972 was hectic. The 

volume of trades that day was 30 % more than that of the previous day (Tr. pp. 

50, 54, 240, 263-264, Exhibits CX-21 and 22). When trading is heavy and prices 

become erratic there tends to be a higher incidence of such violations (Tr. p. 

130). 

Finally we are impressed by the fact that respondent stopped trading when he 

was informed of his overtrades and cooperated fully with the investigation of 

such violation. (Tr. pp. 47-51, 58, 74, 243-244). 

We believe the sanction proposed herein to be consistent with the Judicial 

Officer's decision in In re George Rex Andrews, 32 Agric. Dec. 553 (32 A.D. 

553). 

However, it must be recognized that the severity of the sanction must be 

measured by its impact on the particular respondent rather than by the number of 

months or years of the suspension order. A suspension order should be 

sufficiently long to serve as an effective deterrent to the respondent and to 

other potential violators, considering the impact of the suspension order on the 

particular respondent. 

V 

Another principle in determining the sanction to be imposed in a particular 

case is that, in general, there should be a reasonable relationship between the 

sanction and the unlawful practices found to exist. In other words, the more 

serious the violation, the more severe should be the sanction. Even though 

punishment for the sake of punishment is not a relevant consideration in the 

field of administrative law, the principle of having a reasonable relationship 

between the violation and the sanction still has validity in a case of this 

nature. This is because in order to achieve the major Congressional purposes of 

the regulatory program, it is more important to deter serious violations than 

minor violations. Hence a severe sanction for a serious violation will have a 

greater deterrent effect than a milder sanction for a lesser violation, and thus 

will tend to effectuate the 
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major objectives of the regulatory program." (32 Agric. Dec. at page 578-579 (32 

A.D. at page 578-579)). 

+ + + 

"For the reason set forth above, where the violation is intentional, I 

believe in severity rather than lenity to deter future violations by the 

respondent and others." (32 Agric. Dec. at page 583 (32 A.D. at page 583)). 

+ + + 

Considering the impact of respondent's violation upon the regulatory program 

as disclosed by the record, as well as the impact of this recommended sanction 

upon respondent whose sole occupation involves commodity futures trading (Tr. 

pp. 221, 256-257), we believe the imposition of a cease and desist order and the 

30 day denial of trading privileges to be sufficiently effective to deter future 

violations by respondent and other potential violators. 

In conclusion we might add that this decision should not be construed as a 

quibble with the Agency on the propriety of sanctions to be imposed. * We 

believe that the full range of sanctions contained in Sections 6(b) and 6(c) of 

the Act (7 U.S.C. 9 and 13b) should be utilized wherever appropriate. While we 

respect the Agency's expertise in matters of this nature, we believe there exist 

in this proceeding mitigative factors which justify a sanction less stringent 

than that suggested by complainant. 

* It seems appropriate however in the light of language such as appears 

in In re J. A. Speight et al., P&S Docket No. 4686, page 49, FN 23 (Feb. 

15, 1974). 

"In any case, the weight that I will give to the Administrative Law 

Judge's determination as to the sanction will depend upon the extent to 

which it appears, either from the record or from his prior experience, that 

he was fully informed as to all of the "legislative," background facts 

relevant to the particular type of violation involved in the case." 

ORDER

(1) The respondent, Myles J. Kerrigan, shall cease and desist from exceeding 

the trading and position limits fixed by the Orders of the Commodity Exchange 

Commission. 

(2) Respondent, Myles J. Kerrigan, is prohibited from trading on or subject 

to the rules of any contract market for a period of thirty (30) days, and all 

contract markets shall refuse trading privileges to the said respondent during 

this period. Such 

 

prohibition and refusal shall apply to all trading done and positions held 

directly by the respondent, either for his own account or as the agent or 

representative of any other person or firm, and also to all such trading done 

through, and all positions held indirectly by, persons or firms owned wholly or 

in substantial amount by the said respondent, or in any way subject to his 

direction or control, including but not limited to O'Connor Grain Company. 

(3) The cease and desist provisions of this order set forth in paragraph 1, 

above, shall become effective on the date this decision and order becomes final. 

The period of the prohibition of trading and denial of trading privileges to the 

Respondent set forth in paragraph 2, above, shall become effective on the 

thirtieth day after the date this decision and order becomes final. * 

(4) Pursuant to the amended Rules of Practice governing proceedings under the 

Commodity Exchange Act, this decision and order becomes final without further 

procedure thirty-five (35) days after service hereof, unless appealed to the 

Secretary by a party to the proceeding within thirty (30) days after service, as 
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provided in sections 0.16 and 0.18 of the amended Rules of Practice published in 

the Federal Register of August 20, 1973, (38 F.R. 22381). 

(5) A copy of this decision and order shall be served on each of the parties 

and on each contract market. 

* The Decision and order became final May 1, 1974. -- Ed. 

 

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