For Release: April 9, 1998
CFTC Notifies the New York Mercantile
Exchange's COMEX Division of its Results of a Rule Enforcement
The Commodity Futures Trading Commission (Commission) has notified the
COMEX Division (COMEX) of the New York Mercantile Exchange of the
results of a limited-scope rule enforcement review completed by the
Commission's Division of Trading and Markets (T&M). The
purpose of the review was to evaluate COMEX's market surveillance
program for compliance with section 5a(a)(8) of the Commodity Exchange
Act and Commission regulation 1.51(a)(1).
T&M found that COMEX maintains an adequate market surveillance
program for identifying indications of possible congestion or other
market situations conducive to possible price distortion. COMEX also
has adequate procedures for monitoring speculative position limits and
accounts that exceed position accountability thresholds. In addition,
COMEX reviews hedge exemptions and accountability levels regularly to
ensure that they are appropriate for market participants. Moreover,
T&M found that market surveillance inquiries are generally
completed within the four-month requirement of Commission regulation
However, T&M also found three aspects of COMEX's market
surveillance program that should be improved. First, certain exchange
of futures for physicals transactions reviewed by COMEX, among other
things, lacked conclusive evidence that a change of ownership of the
cash commodity had occurred. Second, the Control Committee did not
meet often enough during potentially problematic contract expirations.
Third, COMEX's investigation into possible price manipulation in
the June 1996 copper future was too narrow in scope given the dominant
participants' prolonged positions in both the cash and futures
markets leading up to the June expiration.
T&M's report sets forth recommendations for improvement to address these issues. COMEX will have 60 days to respond to the recommendations. Copies of the report are available from the Commission's Office of Public Affairs, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581, (202)418-5080.