For Release: October 5, 2000
CFTC Releases Rule Enforcement Review of the NYMEX Division of the New York Mercantile Exchange
WASHINGTON- The Commodity Futures Trading Commission (Commission) has notified the New York Mercantile Exchange of the results of a rule enforcement review of the NYMEX Division (NYMEX) completed by the Commission’s Division of Trading and Markets (T&M). The purpose of the review was to evaluate NYMEX’s audit trail and recordkeeping, trade practice surveillance, and disciplinary programs. The target period for the review was March 1, 1999 through February 28, 2000.
T&M found that NYMEX maintains an adequate trade practice surveillance program. The Exchange primarily uses a sophisticated computerized surveillance system to monitor its markets for possible trading violations. This is supplemented by floor surveillance and recordkeeping reviews. Investigations generated from surveillance activities were thorough, well documented, and completed in a timely manner. T&M, however, found one investigation that, when taken together with a series of related investigations and inquiries, appears to form the basis for a referral to a disciplinary committee for consideration of charges. Accordingly, T&M recommended that NYMEX should present such cases to a disciplinary committee.
T&M also found that NYMEX maintains an adequate disciplinary program. Disciplinary matters are promptly referred to committees, findings appear to be supported by the evidence, penalties appear reasonable relative to the conduct being sanctioned, and disciplinary action is taken in a timely manner. T&M, however, made two recommendations for further improvement. T&M recommended that NYMEX should order restitution in all settlements and disciplinary decisions where the amount of customer harm can be determined and should disclose the member’s prior relevant disciplinary history when the case is presented to any disciplinary committee for consideration of sanctions. Lastly, T&M found that NYMEX maintains an adequate program for reviewing and enforcing compliance with its audit trail and recordkeeping requirements.
NYMEX will have 60 days to respond in writing to T&M’s recommendations. 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 http://www.cftc.gov/tm/tmnymexrer092600.htm