The Commodity Futures Trading Commission has proposed using a sledgehammer to squash a problem most futures exchanges say doesn’t exist.
The commission has approved a rule restricting how mistakes on trading cards, order tickets and other trading records can be corrected.
The rules require traders to use the same pen to correct errors. Woe unto those whose pen runs out of ink or who lose their ballpoint during the course of a day when hundreds of contracts are written.
Not only do the rules require the same pen, they prescribe how many lines (1) a trader is to draw through the incorrect information and prohibit using felt-tip pens or markers.
Chicago’s futures exchanges wasted little time in blasting the new rules, which go into effect in 60 days.
“While a well-intentioned proposal, this is overkill,” said Jack Sandner, chairman of the Chicago Mercantile Exchange.
“This is a pretty clear-cut case of micromanagement,” said David Prosperi, senior vice president and assistant to the president of the Chicago Board of Trade.
In a letter last month to the agency, the CBOT said the rule “is another example of the extent to which trading in exchange markets is regulated in the minutest detail, which stands in stark contrast to the largely unregulated nature of the over-the-counter markets and to the less-regulated foreign markets.”
The CFTC said the new requirements are intended to limit the opportunity for altering records to hide illegal trades and to improve the tracking of trades.
According to the agency, its surveillance staff has found instances in which it appears that members of futures exchanges have altered or created trading records to facilitate illegal trading activities.
But Sandner said he believed it was the case of a regulator out of control.
“This is a perfect example of how a regulatory body whose function is oversight just can’t resist delving into the minutiae,” he said.
