Market Manipulation Regulation - Comment Letter - CME Group - January 3, 2011

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Gavel.png FINAL RULE: This page refers to the proposed rulemaking on the anti-manipulation and ant-fraud. The CFTC final rule was issued at its July 19 open meeting.
Dodd-Frank Timeline, Proposed Rule Regarding Prohibition of Market Manipulation
Proposal Date Final Rule Effective Date
November 3, 2010 July 14, 2011 August 15, 2011

Prohibition of Market Manipulation, CFTC
January 3, 2011

In the comment letter, CME Group explains how using SEC Rule 10b-5 as a model for the proposed rule is not universally adaptable, and thus, inappropriate. The letter cites several ubiquitous practices among market participants that, under the proposal, could be construed as "manipulative." Furthermore, the proposal offers "no guidance as to what types of conduct would qualify as an 'effort to influence', nor does it explain how market participants can distinguish an 'improper' from a 'proper' effect. CME Group offers several recommendations, including:

  • The proposed rule should not prohibit any market participant from trading on non-public "inside" information.
  • Futures market participants should not be required "to provide marketwide disclosure nor expansive duty to correct."
  • A "scienter standard" that requires a showing of "extreme recklessness" should be adopted.
  • The "in connection with" language from the proposal should be clarified to apply only in cases where transactions can be linked directly to "prohibited fraudulent or deceptive conduct."
  • Clarifications are needed in the language of "false reporting" and "price manipulation."

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