September 9, 2013
Washington, DC — The Commodity Futures Trading Commission (Commission) has notified ELX Futures, L.P. (ELX or Exchange) of the results of a rule enforcement review completed by the Commission’s Division of Market Oversight (Division). The review covered the target period from June 1, 2011 to May 31, 2012. The Division assessed the Exchange’s compliance with Core Principles 4 and 5, pre- and post-Dodd–Frank Act, relating to the Exchange’s market surveillance program. ELX contracted with the National Futures Association (NFA) to perform certain regulatory services on behalf of the Exchange, including market surveillance. Therefore, the review also examined NFA’s performance of its market surveillance responsibilities.
The Division had no recommendations with respect to the Exchange’s and NFA’s compliance staff, market surveillance systems, routine surveillance of market fundamentals, surveillance of expiring contracts, or monitoring of large traders, position limits, and exemptions from position limits.
However, the Division identified some areas in which the Exchange or NFA need to make improvements. The Division made several recommendations regarding NFA’s and ELX’s documentation and log procedures for inquiries and investigations. Among other things, the Division notes that it recommended that any inquiry or investigation that is initiated by NFA, even if NFA later determines to proceed with it, should be documented, logged, closed with a closing memorandum, and retained by NFA. In addition, with respect to Exchange for Related Position transactions (EFRPs), the Division recommended that: (1) NFA include Exchange for Related Position (EFRP) transactions electronically matched by a third party provider in the existing pool of transactions subject to random review; (2) NFA strategically select more EFRP transactions for review with an eye to detecting misconduct; and (3) NFA should ensure that it reviews EFRP transactions from every Clearing Privilege Holder that clears EFRPs on ELX every calendar year.
Copies of the report are available from the Commission’s Office of Public Affairs, Three Lafayette Centre, 1155 21st Street N.W., Washington, DC 20581, 202-418-5080, or by accessing the Commission’s website at www.cftc.gov.
Last Updated: September 9, 2013