MARKET REGULATION ADVISORY NOTICE

ExchangeCME

Subject

Computerized Trade Reconstruction (“CTR”)
Clearing Member Back Office Audit Enforcement Program

Rule References

Rule 536

Advisory Date

August 29, 2022

Advisory Number

CME RA2203-2

Effective Date

September 13, 2022

Effective on trade date Tuesday, September 13, 2022, and pending all relevant CFTC regulatory
review periods, this Market Regulation Advisory Notice will supersede CME & CBOT MarketRegulation Advisory Notice RA0806-3 from March 26, 2008. It is being reissued as a CME-only
Advisory Notice in connection with the termination of open outcry trading in all CBOT products.
536.F. Audit Trail Violations
CTR Clearing Member Back Office Audit Enforcement Program
The Market Regulation Department will conduct audits of clearing members to verify that required audit trail
information has been accurately recorded and submitted. The CTR audit threshold level for firms failing topick up and timestamp sequenced cards, verbal order cards and floor orders is 20%. The threshold for allother firm audit trail or recordkeeping deficiencies is 10%.
Percentage calculations will be made based on an examination of a combination of sequenced cards, verbal
orders and floor orders totaling 150 documents. The number of documents containing a deficiency(ies) will
be divided by the total number of documents examined in determining the deficiency percentage.
Violations of each threshold within 24 months shall be subject to automatic fines in accordance with thefollowing schedule:First occurrence$2,500
Second occurrence$5,000Subsequent occurrence(s)$10,000
A firm will have 15 days after receipt of a fine to present evidence to the Market Regulation Department insupport of having the fine dismissed. If the firm does not submit such evidence, or if the Market Regulation
Department determines that the evidence submitted is insufficient to reduce the percentage below thethreshold level, the fine shall be final and may not be appealed.
Notwithstanding the provisions of this Section, the Market Regulation Department may, at any time, refermatters that it deems egregious to the Chief Regulatory Officer.

Questions regarding this Advisory should be directed to the following individuals in MarketRegulation:
Jeff Nierman, Lead Data Investigator
Jackie Cerven, Senior Data Investigator

312.341.3195
312.872.5341

CME RA2203-2
August 29, 2022
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FAQ Related to CME 536.F.
CTR Clearing Member Back Office Audit Enforcement
Program
Q1:

How often will clearing firms be audited?

A1:

Each firm will be audited at least once every 12 months.

Q2:

How will the back-office audit be conducted?

A2:

Staff of the Market Regulation Department will conduct the audit. If a clearing firm has
multiple divisions, all divisions will be audited at the same time. A minimum of 150
documents covering at least a two-day period will be reviewed. Upon completion of theaudit the clearing firm will receive reports detailing the results.

Q3:

How will the error percentage be calculated for the “Data Entry Errors” portionof the audit?

A3:

The percentage will be based on the total number of identified keypunch errors
divided by the total number of documents examined. A document which contains
multiple keypunch errors will be counted as one error for purposes of calculating thedata entry error percentage.

Q4:

How will the error percentage be calculated for the “Collection Deadline”
portion of the audit?

A4:

The percentage will be based on the total number of documents which aredetermined to have been collected late divided by the total number of documents
examined.

Q5:

Who issues the fines pursuant to the CTR back-office audit fine schedule?

A5:

The fines are issued by the Market Regulation Department.

Q6:

May a CTR fine be appealed?

A6:

A firm will have 15 days after receiving notice of an automatic fine to present evidence
to the Market Regulation Department to have the fine rescinded and the violation
dismissed. The Market Regulation Department will determine if such evidence issufficient to reduce the error percentage below the threshold level. The decisions of theMarket Regulation Department are final.

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