CFTC asks Congress for greater powers over ECMs

Oversight of trading on regulated futures markets and exempt commercial markets (ECMs) is generally satisfactory but some legislative action is still required, the Commodity Futures Trading Commission (CFTC) has concluded.

In a report delivered to Congress earlier this week, the Commission said “the risk-based tiered approach has operated effectively and the current level of regulation is appropriate”. However, the maturation of ECM contracts, particularly those that serve a significant price discovery function for transactions in commodities in interstate commerce, “warrants increased oversight to prevent price manipulation or other disruptions to market integrity”.

The CFTC made a number of recommendations to align ECMs more closely with the stringent supervisory requirements for the regulated futures exchanges, otherwise known as designated contract markets (DCMs).

Included among the proposed changes are provisions for reporting large trader positions and the adoption of position limits and accountability levels, two measures DCMs already comply with, as well as emergency authority for the CFTC to alter and supplement contract rules to prevent manipulation  and disruption of the cash-settlement process.

The report was submitted as Congress debates reauthorising the Commodity Exchange Act, the statute that gives the CFTC its authority.