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Statement by Brian Williamson - Chairman, LIFFE

Date 22/03/1999

Brian Williamson, LIFFE Chairman, made the following statement concerning the recent CFTC release at the Futures Industry Association Conference in Boca Raton: A year ago, here in Boca, the Chairperson of the Commodity Futures Trading Commission (CFTC) rightly judged that the financial markets were undergoing radical change. That electronic trading, in an open architecture environment, with worldwide distribution, was the shape of the future. And what is more, the CFTC was determined to do something about it. The Commission announced plans to introduce a new regime from which US investors would stand to benefit enormously. This would allow approved foreign futures exchanges to place trading facilities in the US. At the same time, the CFTC's initiative should have encouraged foreign regulators to follow suit. The CFTC had realised that US market participants are very significant users of foreign exchanges like LIFFE. And that those users were demanding more immediate and more efficient access to markets outside the US. Allowing for exchanges to distribute trading terminals in the US would meet that demand and American investors would benefit. They would, in particular, be able to respond far more quickly to changes in market conditions. And, crucially, they would be able to trade on the same basis as their European counterparts. These benefits could not come too soon for US investors. Indeed, having recently consulted with many of the big players in New York and Chicago, many of whom are members of LIFFE and all of whom conduct international business, it is clear to me that they want direct access to LIFFE's markets as early as possible. Now, a year on, the exchanges, member firms and their customers should be reaping the benefits of the promised reforms. We should be acknowledging that the CFTC had stolen a march on many other regulators around the world. And we should be urging those regulators to follow the CFTC's example. Sadly, the reality is very different. Instead of pressing ahead with the plans of a year ago, the CFTC became bogged down in hesitation and delay. The very promising start was not sustained. By now, we wanted and expected permission to make LIFFE CONNECTâ„¢ available in the United States. Instead, we have a seventy-five-page CFTC document consulting on a proposed rule. From LIFFE's point of view, as we seek to place screens in the US and be on an even par with our competitors, all the words in the 75 pages can be summed up in one short disastrous word -- NO! The affect of this is a continuation of a discriminatory stance against LIFFE. The injustice is clear and the result will be denial of access to the centre of EURO trading - London, where 90% of the market is traded. Our market has grown since Jan 4th to a position of outstanding contracts approaching that of the gross national product of the U.S! Over the last year, LIFFE has continually sought rectification of this discrimination. We have experienced unfulfilled promises, paralyses, procrastination and complications. What we have been asking for is simply fair treatment; instead we now face continued unequal and unfair treatment. And as a result many others will suffer by this decision. As an example, LIFFE's projected expenditure of $5 million in the US for the installation of technology will now have to be abandoned and added to our expansion elsewhere in the world. As a result, US funds will be disadvantaged in trading directly on the world's second largest money market. On the regulatory front, the CFTC will have missed a valuable opportunity of keeping more of the audit trail in the U.S. thus denying the opportunity for better risk management protection for U.S. firms. We recognise that new trading technology can raise difficult issues for regulators. It challenges established regulatory practices. At the extreme, it can render them obsolete. But regulators must meet the challenge which new technology poses. The development of the truly global markets is at stake. So too is unparalleled investor choice. In London today, five US exchanges may trade in a way which continues to be denied to LIFFE today in the US. The approval for the Cantor Exchange for trading in the UK, in fact, was completed in four months. All of this proves that delay is the enemy of innovation and good regulation. One can face revolution if they don't embrace evolution. And the CFTC is failing to keep up with evolution. This document impedes rather than promotes growth. Ultimately investors will demand easy and direct access to important and well-regulated foreign markets. Regulators with foresight will recognize this and act upon it. The promising stance taken by the Chairman a year ago has now proved to be just that - only promises.