Release: #3972-96

For Release: November 27, 1996

COMMISSION RECEIVES STAFF REPORT ON CBT MARCH 1996 WHEAT FUTURES CONTRACT EXPIRATION AND INSTITUTES A REVIEW OF EXCHANGE DISCIPLINARY ACTIONS

Washington...The Commodity Futures Trading Commission (Commission) has received a staff report concerning the expiration of the Chicago Board of Trade's (CBT) March 1996 wheat futures contract. Based on the report, the Commission has instituted a review of six disciplinary actions initiated and settled by the CBT.

The Commission has exercised its authority under the Commodity Exchange Act to take review of an exchange's disciplinary actions on its own initiative, rather than upon the request of one of the parties to a disciplinary action.

The Commission ordered that its staff report be made part of the record on review and granted the CBT members named in the actions 30 days to respond to the concerns raised by the report. The Commission also granted the CBT 14 days after that to file its own response.

The staff report, authored jointly by the Commission's Divisions of Trading and Markets and Enforcement, notes that "the Exchange's investigation was conducted in an expeditious manner." It concludes, however, that the six settlements that consisted solely of letters of reprimand, "do not reflect the gravity of the violation and may not sufficiently deter future conduct...[of a similar nature]." It also concludes that the sanctions "appear to be inconsistent" with two settlements entered into with other participants in the expiration, who were jointly fined $10,000.

By way of background, the CBT investigated trading activity in connection with the expiration of its 1996 March Wheat futures contract for possible violations of Exchange rules. During that period prices rose from $5.30 per bushel to a high of $7.50 per bushel. As a result of its investigation, the CBT filed disciplinary actions against and entered into settlements with eight parties. The violations that the CBT investigation uncovered principally related to the conduct of trading after the market should have closed.

The staff report also reviews and makes certain recommendations relating to CBT rules and procedures, some of which were adopted by the CBT in response to the events surrounding the expiration of this contract.

For a copy of the report, please contact the Commission's Office of Public Affairs, (202) 418-5080.