July 22, 2014

CFTC Releases Rule Enforcement Review of ICE Futures U.S.

Washington, DC — The U.S. Commodity Futures Trading Commission (Commission) notified ICE Futures U.S. (Exchange) today of the results of a rule enforcement review completed by the Commission’s Division of Market Oversight (Division). The Division assessed the Exchange’s compliance with elements of Core Principles 4 and 5, relating to the Exchange’s market surveillance program.

The Division found that the Exchange has appropriate tools for monitoring daily trading activity and large trader positions. The Exchange also has adequate procedures for monitoring deliverable supply of physical-delivery contracts. Finally, the sanctions for violations related to market surveillance imposed by the Exchange via warning letters and monetary fines are generally reasonable.

The Division identified certain areas in which the Exchange needs to make improvements. The Division recommended that:

• Since the Exchange’s Regulatory Oversight Committee (ROC) has an even number of members and no tie-breaking procedures, the Exchange should either implement tie-breaking procedures to resolve tie votes, or ensure that the ROC is composed of an odd number of members greater than one;
  
  
• The Exchange should maintain staffing sufficient to perform all of its surveillance responsibilities, including timely completion of surveillance investigations;
  
  
• If the Exchange intends to sanction misreporting of open interest alongside the Exchange’s clearinghouse (Ice Clear U.S.), then the Exchange should implement rules stating that open interest misreporting represents a violation of Exchange rules;
  
  
• The Exchange should formalize the role of Exchange staff in enforcing open interest reporting requirements of the clearinghouse; and
  
  
• The Exchange should require market participants to resubmit detailed information on at least an annual basis to support their hedge exemptions, and ensure, prior to granting a hedge exemption, that applicants complete each question in their exemption applications.

Copies of the report are available from the Commission’s Office of Public 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.

Last Updated: July 22, 2014