For Release: July 17, 1998
CFTC ISSUES CONCEPT RELEASE CONCERNING
PLACEMENT OF FOREIGN BOARD OF TRADE COMPUTER TERMINALS IN THE UNITED
Washington, D.C. -- The Commodity Futures Trading Commission
(Commission) today issued a "Concept Release"
seeking public comment on issues concerning the placement by foreign
boards of trade of computer terminals in the United States. The
Commission stated in the Concept Release that it has received many
inquiries from foreign boards of trade about this topic. The
Commission hopes that the comments received will help it to develop
uniform rules about the placement of these terminals in the U.S. that
will be consistent with the Commission's obligations under the
Commodity Exchange Act to maintain the integrity and competitiveness
of the U.S. markets and to protect U.S. customers.
The Concept Release requests public comment on a variety of issues
concerning the placement and usage of foreign board of trade computer
terminals in the U.S. These issues include, among others: (1) the
extent to which a foreign board of trade should be permitted to place
its computer terminals in the U.S. without being designated as a U.S.
contract market; (2) how to define a "computer terminal" for
purposes of a proposed rule; (3) when a foreign board of trade's
activities and presence in the U.S. make it indistinguishable from a
U.S. board of trade; and (4) how automated order routing and execution
systems that interface with a foreign board of trade's computer
terminals should be treated.
As a means of facilitating discussion on the issues presented in the
Concept Release, the release sets forth one possible regulatory
approach, developed by the Commission's Division of Trading and
Markets (Division), on which comment is requested. Under the approach
set forth by the Division, a foreign board of trade initially would
petition the Commission for an order to place its computer terminals
in the U.S. without being designated as a U.S. contract market. A
petition might include six general categories of information: (1)
general information concerning the petitioner foreign board of trade
and its products; (2) information concerning the petitioner's
rules and regulations, the laws and regulations in effect in the
petitioner's home country, and the methods for monitoring
compliance therewith; (3) information related to the petitioner's
technological system and standards; (4) certain financial and
accounting information pertaining to the petitioner, including
information related to the petitioner's trading volume, if any, in
the U.S.; (5) information concerning the ability of U.S. boards of
trade to place and operate computer terminals in the petitioner's
home country; and (6) information concerning the petitioner's
intended U.S. activities and presence. A determination as to whether
to issue an order would be based upon the totality of information
Under the Division's approach, if the Commission issued a petitioner's requested order, a member of the foreign board of trade/petitioner or an affiliate of a member would be permitted to request confirmation of relief under the order by filing a written confirmation request with the National Futures Association (NFA). The confirmation request would, among other things, indicate the number of and location where computer terminals are to be maintained and include certain certifications and representations as set forth in the Commission's order to the foreign board of trade. A confirmation request would be effective ten business days after receipt, absent notification to the contrary by the Commission or NFA.
The Concept Release will be published shortly in the Federal Register and will be subject to a 60-day comment period. Copies of the Concept Release 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.