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  1. Monthly Futures Exchange Issuance Report: December 2015

    Friday, January 29, 2016 10:50 am by , , , and

    December’s Highlight

    On November 4, 2015, the Chairman of the CFTC, Timothy Massad, gave a speech to the Futures Industry Association Futures and Options Expo, in which he focused on the subject of swap data reporting. The Chairman noted the importance of data reporting to swap regulation generally and lauded the progress that has been made since Dodd-Frank. However, despite the significant progress in swap data reporting, the Chairman stressed that improvements to the reporting system are still necessary and that swap dealers need to improve the quality of their reporting, focusing on completeness and consistency. He stated that for “those industry participants who do not make timely, complete and accurate reporting,” the CFTC will not hesitate to “carry out enforcement actions.” The Chairman noted in particular a recent fine of $2.5 million dollars against a major global bank for repeated failures to comply with swap reporting obligations. Interestingly, in the weeks following the Chairman’s speech on the importance of swap reporting, the futures exchanges saw a particularly high number of disciplinary actions regarding futures reporting violations. See below for more details on the various disciplinary actions from December 2015, including those related to reporting violations. (more…)

  2. FERC Clarifies Scope of Proposed RTO and ISO Disclosure Requirements

    Monday, December 21, 2015 5:58 pm by and

    On December 8, 2015, the Federal Energy Regulatory Commission (“FERC”) Office of Enforcement held a technical conference respecting FERC’s recent Notice of Proposed Rulemaking (“NOPR”) on Connected Entity Data.  As discussed in an earlier post, if adopted, the NOPR would dramatically increase the amount of information that entities participating in Regional Transmission Organization (“RTO”) and Independent System Operator (“ISO”) markets would be required to disclose regarding their affiliates, contractual arrangements, and employees.  In particular, the NOPR would require each market participant to report to each RTO and ISO any “Connected Entities,” a term that is defined to include: (more…)

  3. Monthly Futures Exchange Issuance Report: November 2015

    Friday, December 18, 2015 9:53 am by , , and

    November’s Highlight

    In November there were a significant number of disciplinary actions across the exchanges related to pre-arranged trading, including the execution of block trades. The exchanges clearly continue to focus on these types of violations and market participants should be conscious of the rules for pre-arranged trading and the entry of block trades. The fines for these violations can be significant and can include suspensions. For example, this month an entity was fined $70,000 for the actions its traders took to enter buy and sell orders opposite one another to transfer positions, a violation of Rule 4.02(c). On NYMEX, an entity executed numerous improper block trades, a violation of Rule 526, and was fined $50,000.

    On a related note, CME recently issued a new webcast on EFRPs, transactions that have recently been heavily scrutinized by the exchanges. The new webcast is available here.


  4. New CFTC Proposed Rules on Algorithmic Trading

    Monday, November 30, 2015 10:49 am by

    On November 24, 2015, the Commodity Futures Trading Commission (CFTC) unanimously approved its long awaited Notice of Proposed Rulemaking (NOPR) on automated trading.  The commodities markets have faced a number of unexpected volatility incidents over the past few years, most notably the May 2010 flash crash.  Beginning in 2011, the CFTC raised a number of questions concerning regulating algorithmic trading in an Advanced Notice of Proposed Rulemaking concerning disruptive trading practices.  In 2013, the agency released a detailed Concept Release that formed the foundation for these proposed rules.  The NOPR, dubbed Regulation AT, is intended to, among other things, protect the markets from untested algorithms, algorithms that do not function as designed and to require those that use algorithms to be registered with the Commission.  CFTC Chairman Timothy Massad stated that the proposal “contains a number of common-sense risk controls that I believe recognize the benefits that automated trading has brought to our markets, while also seeking to protect against the possibility of breakdowns.”  Regulation AT assigns various risk controls to clearing futures commission merchants (FCMs), designated contract markets (DCMs), and to users of algorithmic trading systems, designated as “AT Persons.”  The CFTC defines algorithmic trading where “one or more computer algorithms or systems determines whether to initiate, modify, or cancel an order.”  (more…)

  5. FERC Issues 2015 Report On Enforcement

    Tuesday, November 24, 2015 5:00 pm by and

    On November 19, 2015, the Federal Energy Regulatory Commission (“FERC”) released its annual report on enforcement activities for fiscal year 2015.  The report highlights FERC’s continued focus on incidents involving fraud, market manipulation, and other anticompetitive conduct in the markets subject to its jurisdiction.  It also highlights the types of activities and conduct that have been subject to FERC scrutiny over the past year and provides informal guidance that jurisdictional entities should consider when evaluating their own conduct and compliance programs. (more…)

  6. Monthly Futures Exchange Issuance Report: October 2015

    Friday, November 13, 2015 2:11 pm by , , and

    October’s Highlight

    October saw the first criminal conviction pursuant to Section 4c(a) for spoofing.  A jury concluded that for approximately three months, an individual used a computer algorithm to place orders he did not intend to execute for the purpose of giving the impression that there was significant interest in orders he placed on the other side of the market.  The individual and his trading company had already settled allegations of spoofing with multiple CME Group exchanges (CBOT, CEI, CME, and NYMEX) as well as the CFTC in 2013.  The CFTC settlement required both to pay a $1.4 million civil penalty and disgorge $1.4 million in trading profits, and included a ban from trading on any CFTC-registered entity for one year.  Further, the indivdiual also was ordered to pay the CME exchanges a combined $200,000 fine and $1.3 million in disgorgement, in addition to exchange-specific trading bans. (more…)

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