For Release: March 4, 2002
CFTC Releases Follow-up Rule Enforcement Review of the Chicago Board of Trade
WASHINGTON, D.C. – The Commodity Futures Trading Commission (Commission)
has notified the Chicago Board of Trade (CBT) of the results of a follow-up rule enforcement review completed by
the Commission’s Division of Trading and Markets (T&M). The review evaluated
CBT’s implementation of recommendations made by T&M in its June 30, 2000
review (2000 Review) of CBT’s trade practice surveillance and disciplinary
programs. The follow-up review covered the target period of January 1 through June 30,
T&M found that CBT generally has implemented the recommendations set forth in its 2000 Review. CBT has improved its timeliness with respect to completing investigations, and continues to conduct thorough, well documented investigations. CBT also expanded and concluded an investigation of settlement prices across certain option markets, as recommended in the 2000 Review. The investigation resulted in CBT reminding option pit committees and appropriate staff of the importance of ensuring the accuracy of all option settlements, and of their responsibility to document adequately the reasons for any modifications to settlement prices. In addition, CBT has incorporated a quarterly review of option settlement prices into its routine surveillance program.
With respect to CBT’s disciplinary program, in the 2000 Review, T&M found two cases that it believed resulted in insufficient sanctions. In the follow-up target period, T&M found that none of the ten cases closed raised similar concerns. T&M also recommended in the 2000 Review that multiple instances of violations relating to errors and mishandling of orders be referred to a disciplinary committee rather than members being issued repeated reminder letters. In response to this recommendation, CBT informed T&M that most reminder letters that had been issued for violations of the rule were for procedural rather than substantive violations, and that substantive violations were routinely referred to a disciplinary committee. While T&M agrees that substantive violations should be referred to a disciplinary committee, T&M is recommending in its follow-up review that a member who continues to violate even procedural requirements similarly should be referred to a disciplinary committee. In this manner, the committee can take more meaningful remedial action to deter future violations.
Finally, T&M found that CBT issued several notices to its members reminding them of their responsibilities concerning specific electronic trading rules and practices, as recommended in the 2000 Review. These notices related to, among other things, the possible misuse of User IDs and passwords, the prohibition against the exercise of discretion by a non-member terminal operator in the placing of an order, and pre-execution communications.
CBT will have 60 days to respond in writing to T&M’s recommendation. 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.