Federal Register / Vol. 62, No. 219 / Thursday, November 13, 1997 / Notices 60871

4The Commission considers CME Rule 541 to be

an integral part of the Exchange’s trade monitoring

system. In the event of any material change in such

system, the Commission may revisit its

determination to grant this exemption for the S&P

500 futures contract.

5An imputed timing system does not capture the

actual trade execution time but derives a time from

other timing and trade data.

6Commission Regulation 1.35(g) requires that

‘‘[a]ctual times of execution shall be stated in

increments of no more than one minute in length.’’

Section 5a(b)(2) of the Act, among other things,

codified that timing requirement by stating that an

exchange’s audit trail system shall, ‘‘consistent with

Commission regulation, accurately record the times

of trades in increments of no more than one minute

in length.’’ Section II of Appendix A to Commission

Regulation 155.5 requires that a contract market, in

describing its audit trail system in a petition for

exemption from the dual trading prohibition,

‘‘[d]emonstrate the highest degree of accuracy

practicable (but in no event less than 90% accuracy)

of trade execution times required under regulation

1.35(g) (within one minute, plus or minus, of

execution) * * *. ..’’ In addition, the contract

market must ‘‘[d]emonstrate the effective

integration of such trade timing data into the

contract market’s surveillance system with respect

to dual trading-related abuses.’’ For contract

markets that impute trade execution times,

Appendix A requires that the contract market

provide a description of the trade imputation

algorithm, ‘‘including how and why it reliably

establishes the accuracy of the imputed trade

execution times.’’

The Division of Trading and Markets

Memorandum dated October 28, 1997;

and upon review of each element of

CME’S trade monitoring system and of

CME’s trade monitoring system as a

whole, the Commission hereby finds

that CME meets the standards for

granting a dual trading exemption

contained in Section 4j(a) of the Act as

interpreted in Regulation 155.5 for its

S&P 500 futures contract market.

Subject to CME’s continuing ability to

demonstrate that it meets applicable

requirements, the Commission

specifically finds with respect to the

S&P 500 futures contract market that

CME maintains a trade monitoring

system which is capable of detecting

and deterring, and is used on a regular

basis to detect and to deter, all types of

violations attributable to dual trading

and, to the full extent feasible, other

violations involving the making of

trades and execution of customer orders,

as required by Section 5a(b) of the Act

and Regulation 155.5.2 4 The

Commission further finds that CME’s

trade monitoring system includes audit

trail and recordkeeping systems that

satisfy the Act and regulations.

With regard to the S&P 500 futures

contract market, each required

component of CME’s trade monitoring

system, with the exception of oneminute execution time accuracy, is

described in the Commission’s Notice of

Intent to Condition and proposed Order

being submitted for publication together

with this Order. With respect to oneminute execution time accuracy, the

Commission finds as follows:

One-Minute Execution Time Accuracy

CME’s Regulatory Trade Timing

system (‘‘RTT’’) imputes an execution

time for every trade.5 Trade times are

imputed based upon entry and exit

timestamps on order tickets; time and

sales reports; times that the trades were

submitted for clearing; trading card

numbers and sequence of trades on

trading cards; 15-minute bracket codes;

manual execution times for certain

types of trades; calculated differentials

for spread trades; identification of

spread legs and types of spread trades;

and available times resulting from

electronic order entry or trading

systems, if any.

The Commission has made clear that

a ‘‘reliably accurate’’ imputed trade

execution time can be demonstrated

only by a timing window that narrows

the time assigned to the trade to a twominute period within which the trade is

most likely to have occurred. For the

S&P 500 futures contract, CME’s audit

trail system records reliably accurate

trade times in increments of no more

than one minute in length as required

by Section 5a(b)(2) of the Act,

Regulation 1.35(g), and Appendix A to

Regulation 155.5.6 Specifically, the

Exchange has established for the S&P

500 futures contract market that 90

percent or more of imputed trade times,

as assigned by RTT, are reliable, precise,

and verifiable as demonstrated by being

imputed within a timing window of two

minutes or less (‘‘90 percent

performance standard’’).

In order to demonstrate attainment of

the 90 percent performance standard,

the Exchange has provided windows

data for the S&P 500 futures contract

market in response to Commission

requests. For both December 10, 1996,

and March 12, 1997, the percentage of

trades with timing windows of two

minutes or less was 90 percent. On June

30, 1997, the Exchange provided

windows data for three specific trade

dates selected by the Commission using

a random sampling method. The

windows data revealed that the

percentage of trades with timing

windows of two minutes or less was 91

percent on May 28, 1997, and June 5,

1997, and 92 percent on June 10, 1997.

Thus, the Exchange has demonstrated

consistent compliance with the 90

percent performance standard for the

S&P 500 futures contract.

Accordingly, on this date, the

Commission HEREBY GRANTS CME’s

Petition for Exemption from the dual

trading prohibition for trading in its S&P

500 futures contract.

For this exemption to remain in effect,

CME must demonstrate on a continuing

basis that it meets the relevant statutory

and regulatory requirements. The

Commission will monitor continued

compliance through its rule

enforcement review program and any

other information it may obtain about

CME’s program.

Unless otherwise specified, the

provisions of this Order shall be

effective on the date on which it is

issued and shall remain in effect unless

and until it is revoked in accordance

with Section 8e(b)(3)(B) of the

Commodity Exchange Act, 7 U.S.C.

§ 12e(b)(3)(B).

It is so ordered.

Dated: November 7, 1997.

Edward W. Colbert,

Deputy Secretary to the Commission.

[FR Doc. 97–29894 Filed 11–12–97; 8:45 am]

BILLING CODE 6351–01–P

CONSUMER PRODUCT SAFETY

COMMISSION

Sunshine Act Meeting

AGENCY: U.S. Consumer Product Safety

Commission, Washington, DC 20207.

TIME AND DATE: Friday, November 21,

1997, 10:00 a.m.

LOCATION: Room 410, East West Towers,

4330 East West Highway, Bethesda,

Maryland.

STATUS: Closed to the Public.

MATTER TO BE CONSIDERED:

Compliance Status Report

The staff will brief the Commission on

the status of various compliance

matters.

For a recorded message containing the

latest agenda information, call (301)

504–0709.

CONTACT PERSON FOR ADDITIONAL

INFORMATION: Sadye E. Dunn, Office of

the Secretary, 4330 East West Highway,

Bethesda, MD 20207, (301) 504–0800.

Dated: November 10, 1997.

Sadye E. Dunn,

Secretary.

[FR Doc. 97–30037 Filed 11–10–97; 2:38 pm]

BILLING CODE 6355–01–M