The Division found that NYMEX maintains an adequate market surveillance program. NYMEX conducts daily monitoring of futures and cash market prices, market news, volume, open interest, deliverable supply, clearing member and large trader positions, and data on available supply and demand relating to each NYMEX contract. The Exchange also heightens surveillance during the expiration month to ensure the orderly liquidation of contracts. In addition, NYMEX maintains a large trader reporting system that provides an automated means of detecting violations of the Exchange's speculative position limits or speculative limit exemptions. NYMEX also has an adequate program for investigating possible market surveillance-related rule violations, and it investigations were thorough and well documented.
The Division also reviewed NYMEX's oversight of exchange of futures for physicals (EFP) and exchange of futures for swaps (EFS) transactions. The Division found that the Exchange generally has an adequate program for verifying the bona fides of EFPs and EFSs. However, the Division found that relatively few reviews of these transactions involved contracts traded on the Exchange's Commodity Exchange Inc. division (COMEX), and that some EFP and EFS inquiries were open for long periods of time. Accordingly, the Division recommended that the Exchange review its EFP inquiry program and implement modifications necessary to ensure that an adequate number of COMEX EFPs are scrutinized, and improve the timeliness of EFP and EFS inquiries.
The Exchange will have 60 days to respond in writing to the Division's recommendation. Copies of the report are available from the Commission's Office of External 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
