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- The consequences of outsourcing regulatory services to NFA and to an unregulated organization;
- The cross-border legal and bankruptcy issues associated with the Eurex U.S. proposed transatlantic clearing linkage for Eurex and Eurex U.S. products;
- The ability of the CFTC and other U.S. authorities to regulate the persons or entities actually controlling Eurex U.S., who appear to be shielded by its complex corporate structure and foreign domicile; and
- The appropriateness of its plan to pay up to $40 million to buy customer order flow.
CME commended the CFTC's decision recognizing that Eurex's application did not qualify for the fast track 60-day automatic approval process without formal CFTC review.
"We believe the decision to take Eurex's application off the 'fast track' is the right decision for U.S. investors," said CME Chairman Terry Duffy. "It is also in the best interest of safeguarding the integrity of our country's market system. While we do not wish to unduly delay processing of applications from new markets, the CFTC's fast track process does not apply when an application raises the novel jurisdictional and regulatory issues presented in this case."
"The Commission's decision recognizes that there are important and substantive issues regarding the manner in which Eurex U.S. is organized and will operate," said Craig Donohue, who will become CME's CEO on Jan. 1, 2004. "In the application, many important facts were omitted, including how Eurex U.S. will handle critical regulatory, clearing, settlement and financial responsibilities. Nevertheless, Eurex is circulating marketing materials to selected market participants that define some of these processes.
"We do not believe Congress intended to allow new exchanges to enter the marketplace on a fast track process without explaining why it is appropriate to offer tens of millions of dollars in rebates to fiduciary intermediaries to move order flow from an established liquid market to another new market," Donohue said.
Chicago Mercantile Exchange Inc. (www.cme.com) is the largest futures exchange in the United States. As an international marketplace, CME brings together buyers and sellers on its trading floors and GLOBEX® electronic trading platform. CME offers futures and options on futures primarily in four product areas: interest rates, stock indexes, foreign exchange and commodities. The exchange moved about $1.5 billion per day in settlement payments in the first three quarters of 2003 and managed $29.6 billion in collateral deposits at Sept. 30, 2003. CME is a wholly owned subsidiary of Chicago Mercantile Exchange Holdings Inc. (NYSE: CME), which is part of the Russell 1000® Index.
Chicago Mercantile Exchange, CME and GLOBEX are registered trademarks of Chicago Mercantile Exchange Inc. Further information about CME and its products is available on the CME Web site at www.cme.com.
