On 22 May 2025, the United States Commodity Futures Trading Commission (US CFTC) released a CFTC Staff Advisory No. 25-15, reminding Designated Contract Markets (DCMs) and Derivatives Clearing Organizations (DCOs) of their regulatory obligations under the United States Commodity Exchange Act (CEA) and US CFTC regulations concerning market volatility controls. The advisory, jointly issued by the Division of Market Oversight (DMO) and the Division of Clearing and Risk (DCR), provides for preserving market integrity during periods of extreme volatility.
The advisory states that DCMs must comply with Core Principle 4 of the CEA, which mandates mechanisms to prevent manipulation, price distortion, and market disruptions. Regulation 38.255 specifically requires DCMs to implement pre-trade risk controls such as trading pauses, price bands, and circuit breakers tailored to their market characteristics. The US CFTC also referred to the United States Futures Industry Association’s (FIA) “Best Practices for Exchange Volatility Control Mechanisms” as a guiding reference, noting that controls must strike a balance between preventing erratic price movements and preserving efficient price discovery.
DCMs are encouraged to adapt measures such as dynamic circuit breakers, price validation logic (fat finger controls), and daily price limits in a manner sensitive to trading hours, product types, and market volatility. The advisory stresses that appropriate volatility controls, informed by global best practices and market-specific risks, are instrumental in limiting systemic disruptions triggered by geopolitical or economic events.
The advisory directs DCOs to assess the impact of volatility controls on their risk management practices, particularly during timeframes such as the end-of-day settlement period. Where applicable, DCOs are reminded that under US CFTC Regulation 39.13 and internal rulebooks, they may override standard price derivation methods to adopt settlement prices that better reflect economic reality. Such discretion must be exercised transparently and communicated to clearing members and market participants to manage expectations and obligations effectively.
The advisory aligns with the US CFTC’s global regulatory strategy and incorporates recommendations from the Global Markets Advisory Committee (GMAC), promoting harmonisation with international standards. It also references historical precedents such as the 2008 cotton futures episode to illustrate the practical relevance of using alternative price references in volatile scenarios.
This US CFTC Advisory is a considered view of the US CFTC’s DMO and DCR, not binding on the US CFTC. Queries regarding the advisory may be directed to DMO Acting Director Rahul Varma and DCR Acting Director Richard Haynes.
(Source: https://www.cftc.gov/PressRoom/PressReleases/9078-25)
