NEW ICE Futures US Advisory on "Duty to Supervise" issued today

The ICE US Futures issued an advisory notice on December 9 to specify " in broad terms, the key elements of a satisfactory program of supervision". While only 2 pages, there a several very important points stressed in the document:

First, ICE wants to " remind market participants that the adoption of written supervisory policies, alone, is not sufficient to discharge a firm’s supervisory duty under Rule 4.01(a)".  One of the specific points they address to that is to "periodically train its employees/agents regarding Exchange Rules and Rule changes". DCM has been advising clients that a single annual training may not be considered adequate supervision, especially if it a general overview rather than addressing key changes and provisions of exchange rules. Similarly, this would suggest that exchange specific or at least exchange comparative (i.e., differences in CME, ICE US, and ICE Europe rules) training is advisable.
Second, ICE stresses size of firm and level of exchange activity are a determinant in "appropriate", They indicate "while regular manual review and monitoring of an employee’s trading activity may be perfectly sufficient for a proprietary trading firm with 5 traders, a larger proprietary firm with 50 traders may require an automated solution to effectively review and monitor employee activity." This is one of the rare times when the potential requirement of an automated system may be applied to a firm. DCM would also caution that ICE refers to "the nature and size of Exchange activity" elsewhere in the advisory without mention of number of traders. A firm with very active traders may reach the supervisory threshold for greater resources without needing to have 50 traders.

DCM has been a tad strident on the issue of failure to supervise - ICE Futures may have made our point for us.

​The full two page notice is here