CFTC staff is focused on manipulation amid market volatility, chair says

Funtap/iStock via Getty Images

With the conflict in the Ukraine triggering extreme volatility and record trading volume on global markets, the Commodity Futures and Trading Commission's surveillance staff is "surgically focused on their analysis of trading for any manipulative, inappropriate, or disruptive conduct," CFTC Chair Rostin Behnam said at an industry conference in Florida, according to his prepared remarks.

The commission staff is monitoring compliance by exchanges, self-regulatory organizations, and intermediaries for trade processing, execution, and clearing, he added. "Where those obligations also include responsibility to maintain appropriate margin, customer segregation, and capitalization, compliance must unfailingly be maintained," Behnam said. "Indeed, we must hold fast to our regulatory structures and resist the urge to make ad hoc decisions to avoid the natural outcomes of market forces."

The U.S. regulator made the remarks after the London Metal Exchange earlier this month suspended all trading in its nickel contracts and cancelled trades after a huge short position involving China's Tsingshan Holding Group soured as nickel prices soared.

While Benham said markets largely operated well given the challenging situation, the CFTC staff remains on "heightened alert". "There remain unknowns, especially in the derivatives space, as we hit upcoming delivery marks or if we have any number of supply constraints that could affect different products and asset classes," he said.

On Monday, the Securities and Exchange Commission urged broker-dealers to be vigilant during heightened volatility, specifically advising them to collect margin from counterparties "to the fullest extent possible."