The Commodity Futures Trading Commission (Commission) has notified the New York Mercantile Exchange (NYMEX) and the Commodity Exchange (COMEX) of the results of a joint rule enforcement review completed by the Commission’s Division of Market Oversight (Division). The review covered trading from January 1, 2009 to December 31, 2009 (target period). The Division assessed NYMEX’s and COMEX’s (jointly referred to as “Exchange”) compliance with core principles relating to their audit trail, trade practice surveillance and disciplinary programs. Although NYMEX and COMEX merged with CME Group in August 2008, each exchange maintains independent status as a designated contract market. However, CME’s Market Regulation Department (Market Regulation) provides regulatory services for NYMEX and COMEX (as well as CME and CBOT). In addition, all four CME Group exchanges have substantially harmonized their trading rules and use the Globex platform for electronic trading.
The Division found that the Exchange maintains adequate audit trail, trade practice, and disciplinary programs. However, the Division had some concerns regarding compliance staff levels. By the end of the target period, the compliance staff dedicated to the Exchange was unchanged since the Division’s last review despite a significant increase in trading volume and products traded. Although Market Regulation intends to add additional compliance staff in New York for the Exchange and some Chicago-based staff members are available to assist in times of need, the Division recommends that the Exchange continue to take steps as necessary to ensure that compliance staff is increased appropriately when necessary in light of trading volume, products traded, industry changes, new responsibilities assigned to staff, or other relevant developments.
The Division also identified some additional areas in which the Exchange needs to make improvements and recommends that the Exchange (1) impose meaningful sanctions on members to discourage recidivist activity, (2) promptly issue disciplinary decisions after a hearing, and (3) better document disciplinary committee decisions.
Copies of the report are available from the Commission’s Office of External 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.