To: All Members & Staff
Yesterday, we learned that U.S. Representatives John Dingell, Edolphus Towns and Edward Markey sent a letter to the Chairmen of the SEC and CFTC inquiring about recent press reports based on unsubstantiated rurnors and allegations involving trading activity in the Nasdaq 100 lndexs futures contract. As you know, we are involved in a major legislative effort in Washington to repeal the 18-year-old Shad-Johnson Accord that prohibits us from trading single-stock futures. We believe it is no coincidence that the timing of the letter coincides with extensive political activity to prevent this repeal. Attached is the Exchange's media response to this letter.
As you know, the Exchange has implemented novel procedures to enhance our ability to detect and deter any violations that could occur in our markets. Sometimes such actions can lead to rumors and speculation. We remain steadfast in our commitment to taking whatever steps are necessary to ensure that our customers and the public continue to hold us in the highest regard.
Even the appearance of impropriety by our members is cause for great concern. Rest assured that we will continue to vigorously defend our strong record of market integrity and customer protection.
Media Statement of Chicago Mercantile Exchange: August 3, 2000
"The integrity of our markets and our strong self-regulatory capabilities have always been, and will continue to be, of paramount importance to the CME. Therefore, we are extremely troubled that Representatives Dingell, Towns and Markey have relied upon speculation and unsubstantiated allegations to support a call to Chairmen Rainer and Levitt to conduct an investigation of trading activity in the CME's Nasdaq 100 Index® futures contract. The letter is based on press reports of far-fetched rumors respecting the use of paging devices to allegedly facilitate front running of customer orders. However, their letter goes beyond these reported rumors to suggest that manipulative activity injurious to other markets might have occurred. This suggestion is an obvious device to involve the SEC in an investigation involving stock index futures contracts over which the SEC clearly has no jurisdiction. It is no coincidence that this letter comes in connection with political activities aimed at squelching efforts to eliminate the outdated and anti-competitive Shad/Johnson Accord that unfairly restricts futures exchanges from trading equity related futures contracts.
"The Chicago Mercantile Exchange, which is subject to the exclusive jurisdiction of the CFTC under Chairman Rainer, is subject to extensive Federal regulation under the Commodity Exchange Act. Our regulatory programs and audit trail capabilities far exceed securities industry standards. We have kept the Commission fully informed of our surveillance and investigative activities. While we are prohibited from publicly discussing pending investigations, we are entitled to discuss those matters with the Commission. As a result, the Commission is fully aware of our comprehensive regulatory capabilities and investigative tools, as well as the substance of all work we have completed. Our century-long commitment to market integrity and customer protection is unwavering, regardless of rumor, speculation or political jurisdictional battles."
