CFTC Releases Rule Enforcement Review of the New York Mercantile Exchange, Inc. and the Commodity Exchange, Inc.
The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (Division) announced today that it has issued the results of a rule enforcement review of the New York Mercantile Exchange and the Commodity Exchange (NYMEX and COMEX or exchanges). The review, which covered a one-year target period, evaluated the exchanges’ market surveillance programs and their compliance with elements of Designated Contract Market Core Principles 2 (Compliance with Rules), 4 (Prevention of Market Disruption), and 5 (Position Limitations or Accountability). The review did not evaluate the exchanges’ procedures for monitoring Exchange for Related Position transactions, which procedures are currently under evaluation by the Division in a separate rule enforcement review.
The Division found that NYMEX and COMEX, wholly-owned subsidiaries of CME Group, Inc., have adequate market surveillance programs, subject to one recommendation regarding the exchanges’ program for monitoring exemptions from position limits. The Division recommended that NYMEX and COMEX, “consider implementing a formal review process by which they can verify that a market participant who has a position larger than a position limit is, in fact, making use of an exemption, consistent with the strategy described in their exemption application.”
The Division found that the exchanges’ market surveillance systems and programs for routine surveillance of market fundamentals and surveillance of expiring contracts were adequate. It found that NYMEX and COMEX maintain sufficient market surveillance staff for the program areas under review. It also found that the exchanges’ surveillance tools were adequate for detecting rule violations. The review also found that the exchanges’ investigative work in the cases reviewed was thorough and complete, and that matters were closed in a timely manner. The exchanges also have adequate rules to obtain information from market participants.
The report is available on the CFTC’s website at NYMEX and COMEX RER. Printed copies are also available at CFTC’s Office of Public Affairs, Three Lafayette Centre, 1155 21st Street N.W., Washington, DC 20581.