For Release: October 15, 1999
CFTC NOTIFIES THE CHICAGO MERCANTILE EXCHANGE OF ITS RESULTS OF A RULE ENFORCEMENT REVIEW
WASHINGTON -- The Commodity Futures Trading Commission (Commission) has notified the Chicago Mercantile Exchange (CME) of the results of a rule enforcement review completed by the Commissionís Division of Trading and Markets (T&M). The purpose of the review was to evaluate CMEís market surveillance, trade practice surveillance, and disciplinary programs, and certain aspects of CMEís audit trail. The target period for the review was August 1, 1997 through July 31, 1998.
T&M found that CME generally has an adequate market surveillance program. CME staff closely monitor cash and futures prices, spread and basis relationships, size and ownership of deliverable supply, size of large trader positions relative to total open interest and deliverable supply, and the positions of large traders and clearing members. T&M made recommendations concerning, among other things, the documentation of surveillance activities and improving the timeliness of position accountability reviews.
T&M also found that CME maintains an adequate trade practice surveillance program through the use of automated computer surveillance, visual floor surveillance, and video camera surveillance. The Division made recommendations with respect to the documentation of investigation activities and the documentation of continued monitoring of membersí trading activity when an investigation is closed with such a recommendation.
CME also maintains an adequate program of conducting back office audits to review membersí compliance with order ticket and trading card recordkeeping requirements. CME members have a high level of compliance with order ticket account identification and timestamping requirements, and with several trading card recordkeeping requirements. The Division found, however, that member compliance fell below an acceptable level for several trading card recordkeeping standards, including the timely collection and timestamping of trading cards. Accordingly, T&M recommended that CME take appropriate action to increase member compliance with trading document recordkeeping requirements.
Finally, T&M found that CME maintains an effective disciplinary program. Disciplinary matters are promptly referred to a disciplinary committee, disciplinary proceedings are completed in a timely manner, and findings appear to be supported by the evidence. Further, penalties imposed appear reasonable relative to the conduct sanctioned and are in amounts likely to deter further violations.
CME will have 60 days to respond to these and other recommendations set forth in the report. Copies of the report are available from the Commissionís Office of Public Affairs, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581, (202) 418-5080, or by accessing the Commissionís website at www.cftc.gov.