                FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

ANDY SABERI,                           
                         Petitioner,       No. 05-71590
               v.
                                           CFTR No.
                                           CFTR 01-11
COMMODITY FUTURES TRADING
COMMISSION,                                 OPINION
                    Respondent.
                                       
       On Petition for Review of an Order of the
       Commodities Futures Trading Commission

                Argued and Submitted
       March 15, 2007—San Francisco, California

                     Filed June 4, 2007

    Before: Melvin Brunetti, William A. Fletcher, and
             Carlos T. Bea, Circuit Judges.

                    Opinion by Judge Bea




                            6719
      SABERI v. COMMODITY FUTURES TRADING COMMISSION     6721


                         COUNSEL

Hugh J. Cadden, Esq., Corte Madera, California, for petitioner
Andy Saberi.

Nancy R. Page, Esq., and Bella L. Rozenber, Esq., Office of
the General Counsel, Commodity Futures Trading Commis-
sion, Washington, D.C., for respondent Commodity Futures
Trading Commission.
6722   SABERI v. COMMODITY FUTURES TRADING COMMISSION
                            OPINION

BEA, Circuit Judge:

   We are called upon to decide whether a rule of a commod-
ity exchange can form the basis of federal agency action to
punish its violation. If so, was the agency finding proper,
under the circumstances?

   Petitioner Andy Saberi (“Saberi”) intentionally violated
Chicago Mercantile Exchange (“CME”) Rule 8302.E, a spec-
ulative position limit rule. The Commodity Futures Trading
Commission (“CFTC”) determined Saberi’s violation of CME
Rule 8302.E was a violation of 7 U.S.C. § 6a(e) (“§ 6a(e)”)
and imposed a cease and desist order, a $110,000 fine, and
banned Saberi from trading on all exchanges under CFTC
control for 30 days. Contrary to Saberi’s contention in his
petition for review, CME Rule 443 does not limit the CFTC’s
ability to impose sanctions for a violation of § 6a(e). Further,
contrary to Saberi’s contention, the CFTC’s imposition of
sanctions does not violate due process. We deny the petition.

                                  I.

   The CME is the sole American market for frozen pork belly
futures. CME Rule 8302.E restricts the number of open exec-
utory futures contracts (or “positions”) a speculative trader
may possess for a given commodity at a given time. The pur-
pose of this limit is to prevent market manipulation, price
instability, and market disorder as futures contracts reach their
expiration date. See 7 U.S.C. § 6a(a). For frozen pork belly
futures contracts, the CME’s position limit is a function of
both the total deliverable supply1 of frozen pork bellies and
  1
   CME Rule 8302.E(4) defines “deliverable supply” as “the number of
registered deliverable pork bellies reported in the CME Clearing House
Department’s weekly report immediately preceding the first Friday of
each expiring contract month.”
        SABERI v. COMMODITY FUTURES TRADING COMMISSION              6723
the time left until the expiration of the futures contracts. See
CME Rule 8302.E. As the expiration of the futures contracts
approaches and the deliverable supply decreases, the CME’s
position limits decrease.

   For purposes of CME Rule 8302.E position limits, “the
positions of all accounts directly or indirectly owned or con-
trolled by a person or persons . . . and the positions of all
accounts in which a person or persons have a proprietary or
beneficial interest, shall be cumulated.” CME Rule 8302.F
(emphasis added).

   The CME’s Market Surveillance Group is responsible for
monitoring the CME’s speculative position limits. When a
trader or firm holds a position at or near an approaching posi-
tion limit, CME market surveillance staff typically call the
exchange member firm carrying the trader’s position to notify
the trader that his position is at or near the limit and to
encourage the exchange member firm to take appropriate
action for an orderly liquidation of any excess futures con-
tracts.

                                   II.

   Saberi is an experienced trader. Between 1989 and August
2000, he regularly traded futures contracts in silver, gold, cop-
per, cotton, cocoa, cattle, lean hogs, and frozen pork bellies.
Saberi is not, however, a member of the CME. At the relevant
times, Saberi maintained two commodity trading accounts,
one at Dean Witter Reynolds, Inc. (“Dean Witter account”)
and one at ED&F Man International, Inc. (“ED&F Man
account”).

   On Friday, August 11, 2000, the CME Rule 8302.E posi-
tion limit for August 2000 frozen pork belly futures contracts
was 150 contracts net long or short.2 The CME Rule 8302.E
  2
   A futures contract is a standardized contract, traded on a futures
exchange, to buy or sell a certain underlying instrument at a certain date
6724    SABERI v. COMMODITY FUTURES TRADING COMMISSION
position limit, however, decreased to 50 contracts net long or
short at the close of business on Monday, August 14, 2000.

   At the close of trading on Friday, Saberi was in compli-
ance, holding a total of 83 August 2000 frozen pork belly con-
tracts: 50 short contracts in his Dean Witter account and 33
short contracts in his ED&F Man account. Saberi held no long
contracts. On Monday morning, Saberi increased his position
to 93 short contracts by selling 10 additional short contracts
through his ED&F Man account. That morning CME’s Man-
ager of Agricultural Surveillance, reviewed CME’s large-
trader position report, noting that as of the close of business
on August 11, 2000 Saberi held 83 frozen pork belly posi-
tions, which would exceed the 50-contract position limit if not
reduced by the close of trading on August 14, 2000. Accord-
ingly, the CME’s Manager of Agricultural Surveillance con-
tacted both Dean Witter and ED&F Man, confirmed Saberi’s
cumulative position, and informed both firms that the CME
Rule 8302.E position limit for frozen pork belly futures con-
tracts would decrease at the close of trading to 50 contracts
and that Saberi’s positions at all firms would be combined
when determining compliance with the reduced position limit.

   ED&F Man did not contact Saberi on August 14, 2000 to
inform him of his impending position limit violation. Dean
Witter, however, contacted Saberi and informed him that the

in the future, at a specified price. A futures contract gives the holder the
obligation to buy or sell, thereby differing from an options contract, which
gives the holder the right, but not the obligation, to buy or sell. A short
position in a futures contract, or to be short, means the holder of the posi-
tion has the obligation to sell the underlying asset at a specified price at
a later date. Thus, a trader who is short profits if the price of the underly-
ing asset goes down for he can cover his obligation to deliver by purchas-
ing long contracts at descending spot prices. A long position in a futures
contract, or to be long, means the holder of the position has an obligation
to buy the underlying asset at a specified price at a later date. Thus, a
trader who is long profits if the price of the underlying asset goes up, for
he can buy at his lower contract price and sell at ascending spot prices.
        SABERI v. COMMODITY FUTURES TRADING COMMISSION                6725
CME Rule 8302.E position limit would decrease to 50 con-
tracts at the close of trading and that Saberi’s positions at all
firms would be cumulated when determining compliance. As
to Dean Witter’s phone call, Saberi testified before the ALJ,

      Yes. He called me. He said I have to get out some
      of my stuff[.] I ask him why? I mean. I don’t under-
      stand. Why should I do that? I mean, when I’m los-
      ing half a million dollars nobody told me to get out,
      and now I’m trying to make a couple of bucks and
      they tell me to get out.

   Despite this notice, Saberi violated CME Rule 8302.E by
making no attempt to liquidate his excess 43 short contracts
through purchases of long contracts by the close of trading,
electing instead to profit by riding the longs in, allowing the
price of long contracts to drop for lack of bids.3

                                   III.

  CME’s Division of Market Regulation sent Saberi a warn-
ing letter stating he had violated CME Rule 8302.E by
exceeding the 50-contract position limit in effect at the close
  3
    On August 15, 2000, Saberi’s combined position of 93 short contracts
represented approximately 18 percent of the open August pork belly mar-
ket. By the time Saberi liquidated his excess short pork belly futures con-
tracts on August 15, 2000, their value had increased $54,930 from the
close of trading on August 14, 2000 due to a steep decline in the market.
The CFTC found “[t]he steep market decline at least partially reflected the
trading activity of the two long traders that [CME’s Manager of Agricul-
tural Surveillance] had identified as holding positions in excess of 50 con-
tracts when trading opened on August 14, 2000. Both not only liquidated
dozens of contracts that day, but also placed unfilled orders to liquidate
additional contracts. Due to inadequate liquidity, these traders were unable
to reduce their positions to the applicable limit by the close of trading.”
In short, the CFTC found Saberi withheld buying long contracts to cover
his short contracts, thereby affecting market liquidity, and profited from
his position limit violation. That is what is called “riding the longs in.”
6726   SABERI v. COMMODITY FUTURES TRADING COMMISSION
of trading on August 14, 2000. The letter also informed Saberi
that the matter had been referred to the CFTC.

   The CFTC subsequently filed a one-count administrative
complaint against Saberi, charging Saberi with having vio-
lated § 6a(e) by violating CME Rule 8302.E. A CFTC
Administrative Law Judge (“ALJ”) found Saberi had violated
CME Rule 8302.E, issued Saberi a cease and desist order to
refrain from violating CME Rule 8302.E, ordered Saberi to
pay a $110,000 civil penalty, and barred Saberi from trading
on the CME for 180 days.

   Saberi appealed to the CFTC. The CFTC upheld the ALJ’s
factual conclusions, the cease and desist order, and the impo-
sition of a $110,000 civil penalty. The CFTC, however, modi-
fied the ALJ’s trading ban, prohibiting Saberi from trading on
any market regulated by the CFTC, not just the CME, for 30
days. This petition for review ensued.

                             IV.

   We review an agency’s interpretation of a statute de novo,
Vernazza v. SEC, 327 F.3d 851, 858 (9th Cir.), amended by
335 F.3d 1096 (9th Cir. 2003), rejecting those constructions
that are contrary to clearly expressed congressional intent or
that frustrate the policy that Congress sought to implement.
See Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837, 842-44 (1984). Where, however, a statute is
ambiguous or silent on a particular point, review of an agen-
cy’s interpretation is limited to whether the agency’s conclu-
sion is based on a permissible construction of the statute. Id.

                              V.

  [1] Under 7 U.S.C. § 9, the CFTC conducts administrative
proceedings and imposes sanctions for violations of the Com-
modity Exchange Act. See 7 U.S.C. § 9. Here, interpreting
        SABERI v. COMMODITY FUTURES TRADING COMMISSION                 6727
§ 6a(e), the CFTC determined Saberi’s undisputed4 CME
Rule 8302.E position limit violation was a violation of § 6a(e)
and imposed civil sanctions under § 9.

   In relevant part, § 6a(e) states:

      It shall be a violation of this chapter for any person
      to violate any . . . rule . . . of any contract market . . .
      fixing limits on the amount of trading which may be
      done or positions which may be held by any person
      under contracts of sale of any commodity for future
      delivery . . . if such bylaw, rule, regulation, or reso-
      lution has been approved by the Commission[.]5

7 U.S.C. § 6a(e). Accordingly, the plain language of § 6a(e)
unambiguously imposes liability for violations of contract
market position limit rules such as CME Rule 8302.E. Cf.
Hunt, 591 F.2d at 1218.

                                     A.

  Saberi, however, contends that pursuant to CME Rule 443
a “first occurrence” violation of CME Rule 8302.E is not a
“rule violation” and, therefore, his “first occurrence” violation
of CME Rule 8302.E was not a violation of § 6a(e).
  4
     The parties dispute only whether the violation was intentional, a dis-
pute not relevant to liability because, unlike its criminal counterpart,
§ 6a(e) contains no mens rea requirement. Compare 7 U.S.C. § 6a, with
7 U.S.C. § 13(a)(5), see also Commodity Futures Trading Comm’n v.
Hunt, 591 F.2d 1211, 1218 (7th Cir. 1979) (concluding “there is nothing
in either the statutory language or legislative history which suggests that
intent either to affect market prices or specific intent to exceed the specu-
lative limits is a necessary element of a violation” of the predecessor stat-
ute to § 6a(e)). Similarly, CME Rule 8302.E does not require knowledge
or intent.
   5
     The parties stipulated that the CME is a contract market pursuant to 7
U.S.C. § 7 and that the CFTC approved CME Rule 8302.E on May 5,
1998.
6728   SABERI v. COMMODITY FUTURES TRADING COMMISSION
  In relevant part, CME Rule 443 states:

    For purposes of this rule, positions in excess of any
    allowed by a valid hedge approval shall be deemed
    speculative position limit violations. All speculative
    position limit violations shall be handled pursuant to
    Paragraphs A., B., and C.

                             ***

    443.A. First Occurrence
    The first occurrence of a speculative position limit
    violation will result in a warning letter to be issued
    by the Division of Market Regulation. In the case of
    a customer trading at more than one clearing mem-
    ber, the customer, in addition to the commodity rep-
    resentatives and clearing members, will be issued a
    warning letter. A rule violation will not be recorded
    for the first occurrence of a speculative position limit
    violation; however, a record of the incident will be
    maintained.

    443.B. First Violation Following a Warning Letter
    The first speculative position limit violation within
    12 months of the receipt of a warning letter shall
    constitute a rule violation which shall subject the
    violator to a cease and desist order to be issued
    ....

                             ***

    If a customer, trading at more than one clearing
    member, exceeds the speculative position limits after
    having received a warning letter for a previous vio-
    lation of this rule, the customer will be issued a sec-
    ond warning letter, with copies sent to the
    appropriate clearing members, stating that third vio-
        SABERI v. COMMODITY FUTURES TRADING COMMISSION               6729
      lation will result in a hearing to deny access to the
      market.

CME Rule 443 (emphasis added).

   Focusing on the emphasized language in the preceding
quote, Saberi contends his CME Rule 8302.E violation is not
a violation of § 6a(e) because “first occurrence” violations are
not recorded, see CME Rule 443.A, and CME 8302.E viola-
tions constitute “rule violations” only when they occur within
12 months of receiving a “first occurrence” position limit vio-
lation warning letter, see CME Rule 443.B.

   [2] The plain language of § 6a(e), CME Rule 443, and
CME Rule 8302.E does not, however, support Saberi’s con-
tention. Section 6a(e) does not condition liability thereunder
on whether the contract market involved, here the CME,
deems a position limit violation to be a “rule violation” for
purposes of CME disciplinary action. See 7 U.S.C. § 6a.6

   [3] CME Rule 443, which governs the CME’s internal han-
dling of position limit violations, does not state “first occur-
rence” violations are not rule violations for the purposes of
§ 6a(e) liability. Rather, CME Rule 443.A states, “[a position
limit] rule violation will not be recorded for the first occur-
rence of a speculative position limit violation[.]” Similarly,
CME Rule 443.B states CME 8302.E violations “within 12
months of the receipt of a warning letter shall constitute a rule
violation which shall subject the violator to a cease and desist
order . . . .” (emphasis added). Accordingly, contrary to
Saberi’s contention, CME Rule 443.B does not state CME
Rule 8302.E position limit violations are only “rules viola-
tions” when they occur within 12 months of a warning letter.
Rather, CME Rule 443.B indicates subsequent violations
  6
   Accordingly, the CFTC’s interpretation of § 6a(e), i.e., that § 6a(e) is
violated by a violation of CME Rule § 8302.E, is not contrary to clear con-
gressional intent.
6730   SABERI v. COMMODITY FUTURES TRADING COMMISSION
expose the violator to a cease and desist order. CME Rule 443
does not guarantee that there will be no punishment for a
“first occurrence” of CME Rule 8302.E.

   [4] The text of CME Rule 8302.E also does not support
Saberi’s contention. First, it contains express language of pro-
hibition: “No person shall own or control more than” the
applicable number of contracts. Second, nothing in CME Rule
8302.E states that a “first occurrence” position limit violation
is not a rule violation or that it should not be considered such
for purposes of § 6a(e) liability.

   [5] Moreover, even if the plain language of § 6a(e) is not
clear or CME Rule 443 creates some ambiguity regarding the
scope of § 6a(e) liability, the CFTC decided Saberi’s case in
a published disposition. Thus, the CFTC’s interpretation of
§ 6a(e) liability as including all violations of CME Rule
8302.E, regardless of how that violation is treated under CME
Rule 443, is entitled to deference. Christensen v. Harris
County, 529 U.S. 576, 587 (2000) (interpretations contained
in formal adjudications warrant Chevron deference).

 [6] Accordingly, we reject Saberi’s reading of § 6a(e),
CME Rule 8302.E, and CME Rule 443.

                              B.

   Saberi also advances two theories as to how the CFTC’s
interpretation of CME Rule 8302.E, CME Rule 443, and
§ 6a(e) violates due process. Neither theory has merit.

   Saberi contends the CFTC’s interpretation violates due pro-
cess by creating an arbitrary distinction between members of
the CME and non-members with respect to the adjudication
of CME Rule 8302.E violations. Specifically, Saberi contends
“first occurrence” violations by CME members result only in
a warning letter, whereas “first occurrence” violations by non-
      SABERI v. COMMODITY FUTURES TRADING COMMISSION        6731
members result in a warning letter and referral to the CFTC
for additional sanctions.

   The record does not support this contention. The testimony
of CME’s Managing Director of Regulatory Affairs estab-
lishes only that no CME member has been referred to the
CFTC for a violation of CME Rule 8302.E since 1998. More
importantly, if a distinction between CME members and non-
members exists, the record establishes a rational basis for
such a distinction. As CME’s Managing Director of Regula-
tory Affairs testified:

    A. [Saberi’s case] was referred to the Commodity
    Futures Trading Commission due to CME’s limited
    jurisdiction over non-member non-registrant entities.

    Q. When you say the “CME’s limited jurisdiction,”
    what do you mean by that?

    A. Generally speaking, rules of the CME apply to
    members, clearing members, their employees, and
    certain other agents and do not apply to the general
    public. As a result, a number of circumstances arise
    where we will consider referring matters involving
    people outside of our jurisdiction to the CFTC.

   Relying on Upton v. SEC, 75 F.3d 92 (2d Cir. 1996), Saberi
also contends the CFTC’s imposition of sanctions violates due
process because CME Rule 8302.E, CME Rule 443, and
§ 6a(e) do not provide fair notice as to what conduct is pro-
hibited. Upton, however, does not stand for this proposition.

   In Upton, the Chief Financial Officer of a now defunct bro-
kerage firm petitioned for review from the Securities and
Exchange Commission’s (“SEC”) issuance of an order cen-
suring him for inadequate supervision of a subordinate who
circumvented a SEC reserve computation rule. Upton’s subor-
dinate regularly paid down unsecured loans with secured
6732   SABERI v. COMMODITY FUTURES TRADING COMMISSION
loans immediately before the SEC’s weekly reserve computa-
tion and then, following computation, paid down the newly
acquired secured loans with unsecured loans. Doing so freed
up between $20 and $40 million in funds by circumventing
the SEC’s reserve requirement. “It [was] undisputed that
[Upton’s firm] complied with the literal terms of the [reserve
computation rule] at all times. In fact, [the firm’s] paydown
practice was standard procedure at several other brokerage
firms . . . .” Upton, 75 F.3d at 94 (emphasis added). Neverthe-
less, the SEC censured Upton because the practice violated
the spirit of the rule.

  The Second Circuit reversed:

    Due process requires that laws give the person of
    ordinary intelligence a reasonable opportunity to
    know what is prohibited. Although the Commis-
    sion’s construction of its own regulations is entitled
    to “substantial deference,” we cannot defer to the
    Commission’s interpretation of its rules if doing so
    would penalize an individual who has not received
    fair notice of a regulatory violation.

                             ***

    Because there was substantial uncertainty in the
    [SEC’s] interpretation of the [reserve computation
    rule], Upton was not on reasonable notice that [the
    practice] might violate the Rule.

Upton, 75 F.3d at 98 (internal citations and quotation marks
omitted).

   [7] Unlike the conduct in Upton, which complied with the
literal terms of the rule at issue, Saberi’s conduct violated the
literal terms of CME Rule 8302.E, which states “no person
shall own or control more than” the applicable number of con-
tracts. This language—“no person shall own or control more
       SABERI v. COMMODITY FUTURES TRADING COMMISSION        6733
than”—satisfies due process because it gives the person of
ordinary intelligence a reasonable opportunity to know what
is prohibited. Likewise, § 6a(e) contains language giving a
person of ordinary intelligence a reasonable opportunity to
know what is prohibited: “It shall be a violation of this chap-
ter for any person to violate any . . . rule . . . of any contract
market . . . fixing limits on the amount of trading which may
be done or positions which may be held by any person under
contracts of sale of any commodity for future delivery[.]”
7 U.S.C. § 6a(e).

  [8] Accordingly, we reject Saberi’s due process claims.

                               C.

   [9] Saberi’s contention that the CFTC imposed excessive
sanctions also lacks merit. An agency’s imposition of sanc-
tions is reviewed for an abuse of discretion. See Ponce v.
SEC, 345 F.3d 722, 728-29 (9th Cir. 2003). Thus, a penalty
imposed should not be overturned unless it is unwarranted in
law or unjustified in fact. See Balice v. Dep’t of Agriculture,
203 F.3d 684, 689 (9th Cir. 2000). Here, Saberi’s intentional
violation of CME Rule 8302.E supports the CFTC’s imposi-
tion of sanctions. Given that Saberi made no effort to liqui-
date his excess position before the close of trading, even after
being notified to do so by his broker, the CFTC’s finding that
Saberi intentionally violated the CME Rule 8302.E is not
clearly erroneous. The $110,000 fine imposed by the CFTC
is roughly twice the amount Saberi profited by his intentional
violation of CME Rule 8302.E. We do not find such a fine to
be excessive or an abuse of discretion.

  DENIED.
