By Tom Polansek
CHICAGO, June 28 (Reuters) - CME Group Inc, the
world's largest futures exchange operator, on Friday shelved a
plan to update its rules prohibiting wash trades after a
regulator expressed concerns about oversight and enforcement of
the new provisions.
CME, which owns the 165-year-old Chicago Board of Trade and
offers trading on assets from oil to interest rates, had planned
to implement new guidelines for the trades on July 1 to replace
those in place since 2009.
However, CME said in a notice that its old rules will stay
in effect until further notice "following dialogue" with the
Commodity Futures Trading Commission's Division of Market
A CME spokeswoman said she did not have details about the
Wash trades occur when a trading firm improperly sells a
contract to itself without taking any risk in the market. The
practice is barred under U.S. regulatory and exchange rules
because it can create the appearance of an active market where
there is none.
CME's move comes after Bart Chilton, one of five CFTC
members, said on Monday that regulators needed to examine CME's
plan because of unanswered questions about oversight and
The CFTC, concerned about the frequency with which
high-speed traders engage in wash trades, has been reviewing the
banned self-dealing with an eye toward crafting new rules to
prevent it, Chilton told Reuters earlier this year.
The review was prompted by a report from CFTC's surveillance
staff that showed a "shocking" level of self-dealing across a
range of markets, including financial, energy, agricultural and
metals contracts, Chilton said in March.
A CFTC spokesman did not immediately respond to a request
for comment on Friday.
The rules shelved by CME drew a clearer line between
intentional and unintentional self-trading. The distinction is a
key point for high-frequency traders who say that some
self-dealing is inevitable given the speed and volume of their
CME on Monday defended the changes, saying an explanation of
the new rules it submitted to the CFTC was "consistent with
longstanding rule interpretations" and with "well-established
CME earlier this month launched an optional feature on its
electronic trading platform designed to prevent wash trades by
allowing traders to block matching buy and sell orders. The
program "is being used by and remains available for interested
market participants," a spokeswoman said.