Release: 4612-02
For Release: March 4, 2002
CFTC Releases Follow-up Rule Enforcement Review of the Chicago Board of Trade
WASHINGTON, D.C. – The Commodity Futures Trading Commission (Commission)
has notified the Chicago Board of Trade (CBT) of the results of a follow-up rule enforcement review completed by
the Commission’s Division of Trading and Markets (T&M). The review evaluated
CBT’s implementation of recommendations made by T&M in its June 30, 2000
review (2000 Review) of CBT’s trade practice surveillance and disciplinary
programs. The follow-up review covered the target period of January 1 through June 30,
2001.
T&M found that CBT generally has implemented the recommendations set forth in its
2000 Review. CBT has improved its timeliness with respect to completing
investigations, and continues to conduct thorough, well documented investigations. CBT
also expanded and concluded an investigation of settlement prices across certain
option markets, as recommended in the 2000 Review. The investigation resulted in CBT
reminding option pit committees and appropriate staff of the importance of ensuring
the accuracy of all option settlements, and of their responsibility to document
adequately the reasons for any modifications to settlement prices. In addition, CBT
has incorporated a quarterly review of option settlement prices into its routine
surveillance program.
With respect to CBT’s disciplinary program, in the 2000 Review, T&M found
two cases that it believed resulted in insufficient sanctions. In the follow-up target
period, T&M found that none of the ten cases closed raised similar concerns.
T&M also recommended in the 2000 Review that multiple instances of violations
relating to errors and mishandling of orders be referred to a disciplinary committee
rather than members being issued repeated reminder letters. In response to this
recommendation, CBT informed T&M that most reminder letters that had been issued
for violations of the rule were for procedural rather than substantive violations, and
that substantive violations were routinely referred to a disciplinary committee. While
T&M agrees that substantive violations should be referred to a disciplinary
committee, T&M is recommending in its follow-up review that a member who continues
to violate even procedural requirements similarly should be referred to a disciplinary
committee. In this manner, the committee can take more meaningful remedial action to
deter future violations.
Finally, T&M found that CBT issued several notices to its members reminding them
of their responsibilities concerning specific electronic trading rules and practices,
as recommended in the 2000 Review. These notices related to, among other things, the
possible misuse of User IDs and passwords, the prohibition against the exercise of
discretion by a non-member terminal operator in the placing of an order, and
pre-execution communications.
CBT will have 60 days to respond in writing to T&M’s recommendation. 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.