CME Group issued a reminder that all persons who trade on its exchanges agree to comply with all its rules and submit to its jurisdiction. This requires all traders, among other things, to fully cooperate with exchange staff during investigations, including producing requested documents and answering all questions by staff and to participate fully in disciplinary proceedings.
Compliance Weeds: CME Group’s guidance, which it issued in the form of a market regulation advisory notice, broke no new ground. Since August 2012, the Commodity Futures Trading Commission has required all designated contract markets, such as CME Group exchanges, to require all traders to submit to their jurisdiction (click here to access CFTC Rule 38.151). In response, CME Group adopted a rule effectuating this provision (click here to access CME Group Rule 418), as did ICE Futures U.S. (click here to access IFUS Rules 4.00). It often comes as a surprise to exchange non-members, particularly when located abroad, that they must cooperate fully during a DCM’s investigation or disciplinary proceeding, but it is ultimately a CFTC mandate. It is precisely because of the applicability of DCM rules to all traders on a DCM that I previously have argued that the CFTC could more effectively accomplish most of its objectives in proposed Regulation Automated Trading by better leveraging existing exchange requirements and plugging what it perceives to be gaps through amendments to core principles for DCMs rather than by inflicting a new regulatory behemoth on the industry. (For details, click here to access My View adjoined to the article “ICE Futures Issues Guidance Regarding Identification Requirements for Orders Placed Through Its Electronic Trading System” in the February 26, 2017 edition of Bridging the Week.)