ICE Futures U.S. proposed changes to its rules regarding electronic trading to better conform its requirements to market practices, particularly regarding the nature of persons granted direct market access by clearing members. Currently, IFUS’s rules mostly speak in terms of customers of clearing members having DMA. However, said IFUS, many other types of persons have DMA including “brokers executing for customers, persons trading accounts to a power of attorney and employees of firms with direct access, who do not have their own accounts.” Although IFUS’s rules mostly amend existing language to expand the requirements’ application, one amendment adds an additional requirement on clearing members. This provision will now require such firms to “independently maintain appropriate controls designed to facilitate the Clearing Member’s management of financial risk and also utilize such controls designed to facilitate the Clearing Member’s management of financial risk as may be provided by the Exchange from time to time” (new language highlighted; underscored new language emphasized). IFUS’s proposed electronic trading rule amendments are scheduled to be effective April 11, 2016, absent objection by the Commodity Futures Trading Commission.
Compliance Weeds: Separate and apart from ICE Futures U.S.’s proposed amendments to its electronic trading rules, clearing members granting direct access to persons should be aware of two critical existing obligations. Under IFUS’s rules, clearing members must suspend or terminate the direct access of a person if the clearing member has reason to believe that the person “fails to have adequate systems and controls for risk management to monitor its orders and trades effected through Direct Access on a real time basis” (emphasis added) or if actions of the person “threaten the integrity or liquidity of any exchange Contract” or violate applicable law or IFUS rules.