3rd UPDATE: CFTC: CME Needs More Compliance Staff

CME Group (CME), the owner of the Chicago Board of Trade and New York Mercantile Exchange, needs to add more compliance staff to oversee its commodity exchanges, the Commodity Futures Trading Commission said Wednesday.

"The compliance staff dedicated to the exchange was unchanged since the division's last review, despite a significant increase in trading volume and products traded," the CFTC said in a statement.

The CFTC made the same recommendation a year ago during its routine rule-enforcement review of the Chicago Mercantile Exchange and the Chicago Board of Trade. The CFTC didn't say what would happen if CME doesn't add more compliance staff.

Former CFTC Commissioner Sharon Brown-Hruska said the agency was delving much further into the day-to-day workings of the exchanges than it has in the past. She said the review is in keeping with the new "micromanagement mood with regard to markets" at the agency.

"The relationship between the exchanges and the CFTC is not as collegial as it used to be," said Brown-Hruska, a Republican who was on the Commission from 2002-06.

Congress gave the CFTC broader oversight and stronger enforcement power over derivatives markets with the passage of the Dodd-Frank financial overhaul bill in July 2010.

This current CFTC review looked at trading in 2009 at the New York Mercantile Exchange and the Commodity Exchange, which both merged with CME in 2008. Each exchange maintains independent exchange status, but both are policed by one central compliance department at the CME.

The CFTC's Division of Market Oversight recommended that CME add compliance staff because of an increase in trading volume as well as types of products traded.

CME had done a good job of harmonizing trading rules at its four exchanges, the commission added.

CME said that the CFTC's findings "reflect our ongoing commitment to effectively fulfill our self-regulatory responsibilities."

"CME Group has increased its market regulation staffing by more than 20 percent in the past two years, and we continually ensure that our human resources and regulatory technology fully support our industry-leading regulatory programs," a CME spokeswoman said in a statement.

The CFTC also recommended that CME issue disciplinary decisions promptly after a hearing and better document those decisions. The commission also urged CME to impose "meaningful" sanctions on members to discourage repeat offenses.

-By Jamila Trindle, Dow Jones Newswires; 202-862-6684; jamila.trindle@dowjones.com

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