Market Oversight at the Commodity Futures Trading Commission

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Market Oversight at the Commodity Futures
Trading Commission

• Mike Gorham
• Director
• Division Of Market Oversight

February 5, 2003 FERC/CFTC Joint Technical
Conference on Credit Issues in the Energy Markets
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Market Oversight
Market Product Review (14)
Market Compliance (36)
Market Surveillance (47)

• Is the market designed properly?
• Are the products designed properly?

• Are exchanges enforcing their rules?

• Are there signs of an impending manipulation or
  congestion?

Number of staff
3
Is the Market Designed Properly?

• Trading
• Protection of Market Participants
•  
• Fair and Equitable Trading
• Secure and Robust Trading Systems
• Daily Dissemination of Trading Information
•  
•  Administration
• Financial Integrity of Transactions
• Effective Compliance and Disciplinary Programs
•  
• Fair, Objective and Representative Governance
•  
• Adequate Recordkeeping

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Are Products Designed Properly?
Core Principle 5 Use position limits (or
accountability) to reduce potential threat of
manipulation
Core Principle 3 Contracts not readily
susceptible to manipulation
General Oversight Ensure markets serve economic
functions of managing and assuming price risk
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Are the Exchanges Enforcing their Rules?
Trade Practice Investigations
Rule Enforcement Reviews
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Market Surveillance Goal

• Detect and deter manipulation and market
  congestion!

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How?

• Market Monitoring
• Positions
• Deliverable supply
• Price relationships
• Market intelligence
• Position limits
• Dealing with Problems
• Jawboning
• Warning letters
• Emergency action
• Referrals to Enforcement Division

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Bottom Line

• Properly Designed Markets
• Properly Designed Products
• Enforcement of Exchange Rules
• Stop Manipulation in its Tracks