CFTC Releases Rule Enforcement Review of the Chicago Mercantile Exchange and the Chicago Board of Trade

The CFTC released results of a rule enforcement review completed by the Commission's Division of Market Oversight on the CME and CBOT.With respect to the period from November 1, 2010 to October 31, 2011, the Division assessed the Exchanges' compliance with Core Principles 4 and 5, pre- and post-Dodd-Frank Act, relating to the Exchanges' market surveillance program. The CFTC asserted that CME and CBOT procedures for monitoring "exchange for related position" transactions are inadequate. The CFTC provided the following recommendations:

• The Exchanges not grant retroactive hedge exemptions if a participant does not file a timely application and, further, consider untimely hedge exemption applications to be speculative limit violations;
• Market Surveillance utilize its discretion to refer matters to the Exchanges' Enforcement Group
• Market Surveillance ensure that, prior to granting a hedge exemption, the applicant has submitted a complete and accurate application and has designated the appropriate hedging category(ies);
• Market Surveillance ensure that its investigatory memoranda contain appropriate signatures and are accurately dated;
• Market Surveillance ensure that its investigations are closed within 12 months of the date they are opened; and
• the Exchanges consider whether their Market Surveillance staffs are sufficient.

See: CFTC Summary of Results.