For Release: August 12, 1996
COMMODITY FUTURES TRADING COMMISSION RELEASES REPORT ON STATUS OF AUDIT TRAILS AT U.S. EXCHANGES AND RESULTS OF EXCHANGE AUDIT TRAIL RE-TESTS
As part of its Congressional mandate to monitor the audit trail systems of U.S. futures exchanges, the Commodity Futures Trading Commission today is issuing a status report on exchange compliance with the heightened audit trail standards imposed by the Futures Trading Practices Act of 1992.
This report, the second Commission status report on audit trail systems, contains the results of recent re-tests of audit trail systems at the Chicago Mercantile Exchange and the Chicago Board of Trade and further action by both the exchanges and the Commission, including addressing pending exchange dual trading petitions. Improved audit trail requirements have been linked to preventing abuses associated with dual trading, a practice whereby a broker can trade for himself and a customer during the same session.
In releasing this report, Acting Chairman John E. Tull, Jr. said,
"While progress has been made by the exchanges toward meeting the 1995 audit trail standards, the CFTC continues to press for compliance with the Commodity Exchange Act. Re-testing has shown that the 1995 standards still have not been met, so the Commission's report includes additional actions for the exchanges to take which are designed to address the exact concern underlying the audit trail standards -- possible abuses from dual trading."
Since 1992, the Commission has made numerous recommendations to the exchanges in an effort to move them ever closer to meeting the heightened Futures Trading Practices Act audit trail standards. While substantial progress has been made in the area of audit trails, there is still work to be done. The Commission continues to seek compliance with audit trail performance standards for all exchanges, taking into account practicability. In so doing, the Commission has carefully tailored the exchange requirements announced today to address the concern underlying the audit trail standards -- dual trading.
Commissioner Joseph B. Dial said, "We must continue to press for audit trail compliance. Good audit trails are a fundamental part of the process that makes the U.S. futures market the most liquid and the most efficient derivatives marketplace in the world. This, in turn, gives U.S. farmers an important comparative advantage over their international competitors."
Commissioner Barbara P. Holum added, "Audit Trail is essential to market integrity. I congratulate those exchanges which have met the tough audit trail standards, and pledge that we will continue to work with all the exchanges to implement audit trail requirements that protect the public."
The Introduction and Executive Summary are attached to this release and provide a summary of the report's content. Copies of the full report are available on request or on the CFTC's homepage at http://www.cftc.gov.