The proposed Acceptable Practices offer designated contract markets a safe-harbor for compliance with Section 5(d)(15) of the Commodity Exchange Act, and its requirement that exchanges minimize conflicts of interest in their decision-making processes. They address new conflicts of interest which have arisen in a rapidly evolving futures industry. In brief, the proposed Acceptable Practices recognize that increasing competition, changing ownership structures, and innovative business models present new challenges that must be addressed promptly and proactively to insure continued fair, effective, and vigorous self-regulation by designated contract markets.
The proposed Acceptable Practices would require each designated contract market’s board of directors to be composed of at least 50% non-member public directors. They would also require each designated contract market to establish a board-level Regulatory Oversight Committee (ROC), composed only of non-member public directors, to oversee regulatory functions. In addition, the proposal requires that each disciplinary panel include at least one public participant, and that no panel be dominated by any group or class of exchange members. Finally, the proposal offers guidance on the definition of “public” for purposes of service on boards of directors, ROCs, and disciplinary panels.
The CFTC seeks public comment on each element of its proposed Acceptable Practices. The comment file will remain open for 30 days following publication in the Federal Register. Copies may be obtained by contacting the Commission’s Office of the Secretariat, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581, (202) 418-5100 or by accessing the Commission’s website, www.cftc.gov. Interested parties may submit their comments electronically at secretary@cftc.gov. All comments received will be promptly posted on the Commission's website.
