The Commodity Futures Trading Commission (Commission) has notified the Chicago Mercantile Exchange and Chicago Board of Trade (collectively referred to as the Exchanges) of the results of a rule enforcement review completed by the Commission’s Division of Market Oversight (Division). The review covered the period from January 1, 2008, to January 2, 2009 (target period). The Division assessed the Exchanges’ compliance with core principles relating to their audit trail, trade practice surveillance and disciplinary programs. Although CME and CBOT merged in July 2007, each exchange maintains independent status as a designated contract market. However, CME’s Market Regulation Department provides regulatory services for CME and CBOT (as well as NYMEX and COMEX). In addition, the Exchanges have substantially harmonized their trading rules and share a trading floor, and both use the Globex platform for electronic trading.
The Division found that the Exchanges maintain 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 Exchanges’ compliance staff was 18% smaller than the Exchanges’ combined pre-merger compliance staffs. Although additional compliance staff has been hired since the end of the target period, the Division recommended that the Exchanges review the compliance staff size needed to ensure that the regulatory services provided to all CME Group exchanges by the Market Regulation Department remain effective in enforcing compliance with the Exchanges’ rules and Commission regulations. The Division directed that it be provided with a report of the findings. The Division also recommended that the Exchanges increase compliance staff appropriately when necessary in light of trading volume, products traded, industry changes, new responsibilities assigned to staff or other relevant developments.
The Division identified additional areas in which the Exchanges need to make improvements and recommended that the Exchanges (1) review and increase their summary fine schedule for open outcry recordkeeping offenses and (2) better document disciplinary committee decisions.
Copies of the report are available by accessing the Commission’s website at www.cftc.gov.
