By Tom Watterson
The CFTC Division of Market Oversight (the “Division”) released a review of the rule enforcement of ELX Futures, L.P. ELX Futures, however, contracted with the NFA to perform certain market surveillance functions and the review included recommendations for the NFA.
The Division recommended that the NFA take a closer look at Exchange for Related Positions (“EFRPs”) and select more EFRPs for review looking for misconduct. Specifically, the Division recommended that the NFA review transactions from each clearing member.
In a review, generally, the NFA requests documentation from the EFRP parties to determine if the EFRP was entered into in compliance with the exchange rules. This documentation can include: daily account statements; order tickets or blotters for the EFRP; documents supporting the cash component of the EFRP; back office records relating to transactional activity; identification of the ultimate account owner(s) or controller(s); and any other relevant documentation that supports the EFRP execution and reporting requirements.
Market participants engaging in EFRPs should be aware of the potential for increased regulatory scrutiny and the review serves as a good reminder for the increased recordkeeping requirements for EFRPs.
Good day. Good reminder. TSR