Chicago Merc Responds To CFTC Order On Foreign Terminals

The Chicago Mercantile Exchange (CME) responded to the Order issued today by the Commodity Futures Trading Commission (CFTC) in regard to the placement of trading terminals in the United States by foreign boards of trade. The CME said it continues to be optimistic that the CFTC will first ensure that the competitive playing field is absolutely level before admitting any foreign exchanges to the United States. The Commission's June 2 Order expresses a commitment "to address the comparative regulatory levels between U.S. and foreign electronic trading systems so as not to provide one with a competitive advantage." Nevertheless, the exchange said it remains concerned that the CFTC's proposal to simply initiate processes to level the playing field is far from sufficient. The CME cited three reasons for its concerns. First, the CFTC's determination to "initiate processes" to address comparative regulatory levels does not constitute a firm commitment to adopt exemptions that will permit U.S. exchanges to compete on equal terms. Second, the CFTC has abandoned its recent policy of establishing a uniform set of rules governing the admission of foreign exchanges in favor of ad hoc determinations based on non- public information. Third, the CFTC has yet to commit to regulatory parity for U.S. open outcry exchanges versus foreign electronic exchanges, the CME said. Said CME Chairman Scott Gordon: "We have previously testified at length and in detail listing the many devices and procedures that could be employed by foreign exchanges to divert business from U.S. exchanges. Until the CFTC grants U.S. exchanges regulatory parity or agrees to preclude foreign exchanges from engaging in conduct that violates the Commodity Exchange Act, U.S. exchanges will be placed at a devastating competitive disadvantage." CME Chairman Emeritus and Senior Policy Advisor Leo Melamed was appointed last month as Chairman of the CFTC Global Markets Advisory Committee (GMAC) Ad Hoc Committee on Regulatory Parity for Electronic Terminals. He said, "It would be very unfortunate if the Commission chose to proceed on issuing any no-action letters prior to reviewing the findings and recommendations from our committee on this critical issue. The committee is charged with making recommendations that provide fair opportunities for foreign exchanges while ensuring equitable treatment for U.S. exchanges."