Regulator: CME may need more compliance staff

By Reuters
Posted Sep. 15, 2010 at 4:48 p.m.

CME Group Inc., the biggest U.S. operator of futures exchanges, may need to add more staff to adequately oversee its markets, regulators said on Wednesday after a review of CME’s enforcement activities.

CME should review its staff size, report to the Commodity Futures Trading Commission about what it found, and take ongoing steps to make sure staff is “increased appropriately when necessary” to handle more volume and any other relevant developments, the CFTC said after its review.

CME cut its self-policing force after acquiring a rival exchange, raising concerns about its ability to keep tabs on its markets, and later additions still did not bring it back to the pre-expansion level, the CFTC said.

After its 2007 acquisition of the Chicago Board of Trade, CME Group reduced its combined compliance staff by 18 percent, the CFTC said in its review of CME’s enforcement activities from Jan. 1, 2008, to Jan. 1, 2009.

The CFTC said CME had assured regulators it would make only minor cuts to its policing staff after the CBOT acquisition.

“The division does not believe that elimination of more than a fifth of the exchanges’ combined pre-merger number of investigators, and nearly a fifth of the exchanges’ entire combined compliance staffs, can be regarded as minor,” the CFTC’s division of market oversight said in the report.

“Although additional compliance staff has been hired since the end of the target period, the division recommended that the exchanges review the compliance staff size needed,” it added.

In addition to CBOT, CME Group also runs its namesake — the Chicago Mercantile Exchange — and in 2008 acquired the New York Mercantile Exchange. It now has 133 employees assigned to oversee its three markets, the CFTC said.

Regulators told CME about their concerns over staffing in March 2009, and CME added new staff in June and November of that year, the report said.

CME added 17, bringing the total then to 110, compared with the pre-merger level of 114.

A CME spokesman said the hires were not a reaction to the CFTC report, adding that the company is pleased with the regulator’s findings on its audit trail, trade practice, and disciplinary programs.

“We will continue to monitor our staffing levels based on workflow demands to ensure that we have appropriate resources to maintain our industry-leading regulatory programs,” the CME spokesman said.

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