I support the Foreign Boards of Trade (FBOT) Final Rule because it promotes access to markets for U.S. participants, competition, and liquidity. I would like to thank Maura Dundon, Roger Smith, and Alexandros Stamoulis in the CFTC’s Division of Market Oversight for their work on this rulemaking.
I will reiterate key points from my statement on the FBOT proposed rule. [1] As a CFTC Commissioner, I have made it clear that I believe in good policy that enables growth, progress, and access to markets.[2] Accordingly, I am pleased to support Commission efforts that take a pragmatic approach to issues that hinder market access and cross-border activity. I continue to believe that this rulemaking exemplifies policy that ensures a level playing field, and I applaud this step in the right direction for market structure.
FBOTs have been a critical piece of the CFTC’s markets for decades and provide access for U.S. market participants to non-U.S. markets in realization of the global economy and international business.[3] The main substantive amendment in the FBOT Final Rule is to Regulation 48.4, which will now include introducing brokers (IBs)[4] as a permissible intermediary, in addition to futures commission merchants (FCMs), commodity pool operators (CPOs), and commodity trading advisors (CTAs), to enter orders on behalf of customers or commodity pools via direct access on a registered FBOT.[5] I believe that the FBOT Final Rule will provide more choice in brokers and broker arrangements for U.S. market participants that trade foreign futures and ensure that appropriate customer protections are in place.
As sponsor of the CFTC’s Global Markets Advisory Committee (GMAC),[6] I have devoted a significant part of my Commissionership to supporting solutions that will enhance the resiliency and efficiency of global markets.[7] The FBOT Final Rule is policy that mitigates market fragmentation and the associated impact on liquidity, and promotes the overall competitiveness of our derivatives markets. I am pleased to support the FBOT Final Rule.
[1] Statement of Commissioner Caroline D. Pham in Support of Foreign Board of Trade Proposal (Feb. 20, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement022024.
[2] See, e.g., Keynote Address by Commissioner Caroline D. Pham, 98th Annual Convention of the American Cotton Shippers Association (June 22, 2022), https://www.cftc.gov/PressRoom/SpeechesTestimony/opapham2; Statement of Commissioner Caroline D. Pham on Staff Letter Regarding ADM Investor Services, Inc. (June 16, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement061623.
[3] While FBOTs initially had operated pursuant to no-action relief, in 2011, following the Dodd-Frank Wall Street and Consumer Protection Act of 2010, the Commission began registering FBOTs. See Registration of Foreign Boards of Trade, Final Rule, 76 FR 80674 (Dec. 23, 2011), https://www.federalregister.gov/documents/2011/12/23/2011-31637/registration-of-foreign-boards-of-trade.
[4] The Commission generally defines an IB as an individual or organization that solicits or accepts orders to buy or sell futures contracts, commodity options, retail off-exchange forex or commodity contracts, or swaps, but does not accept money or other assets from customers to support these orders. Commodity Exchange Act (CEA) Section 1a(31); 17 CFR 1.3(mm). The Commission registers IBs under CEA Section 4d(g) and CFTC Regulation 3.4(a). 7 U.S.C. 6d(g) and 17 CFR 3.4(a).
[5] 17 CFR 48.4.
[6] CFTC Global Markets Advisory Committee, https://www.cftc.gov/About/AdvisoryCommittees/GMAC. See Commissioner Pham Announces New Members and Leadership of the CFTC’s Global Markets Advisory Committee and Subcommittees (June 30, 2023), https://www.cftc.gov/PressRoom/PressReleases/8740-23.
[7] E.g., Achieving Growth and Progress: Statement of Commissioner Caroline D. Pham at the Global Markets Advisory Committee June 4 Meeting (June 4, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement060424; Opening Statement of Commissioner Caroline D. Pham before the Global Markets Advisory Committee (Feb. 13, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement021323. To date, the GMAC has advanced 13 recommendations and reports to the Commission on a broad set of significant global markets issues, including U.S. Treasury market liquidity, well-functioning repo and funding markets, capital and margin requirements, exchange volatility controls, T+1 securities settlement, improved collateral management, central counterparty (CCP) default simulation, streamlining trade reporting data to monitor systemic risk, and a foundational digital asset taxonomy to facilitate alignment in regulation across jurisdictions.
