For Release: November 6, 1998
The Commodity Futures Trading Commission Reminds FCM's and IB's of their Obligation to Prepare their Reporting and Disclosure Systems to Accommodate the Introduction of the New Euro-Currency
In connection with the advent of the European Monetary Union (EMU), a new currency, identified as the euro, is scheduled to be introduced on January 1, 1999. The Commodity Futures Trading Commission (Commission) reminds futures commission merchants (FCMs) and introducing brokers (IBs) of their obligation to prepare their systems to accommodate the introduction of the euro and to disclose related material information, as appropriate, to customers.
Eleven European countries have qualified and agreed to begin merging their individual national currencies (legacy currencies) into a single common currency, the euro. This process is scheduled to start at the beginning of next year and to be completed by June 30, 2002. The Commission is aware that FCMs, IBs, and their service providers are preparing their systems to handle new products, currency and position conversions, and customer statements, as necessary. The Commission also is aware that efforts are ongoing to inform FCMs' and IBs' customers of the impending changes and the effects that the euro may have on their positions and activities in these markets. For example, on September 24, 1998, the Futures Industry Association (FIA) provided its members with a "Notice on European Monetary Union" drafted by a subcommittee of the FIA Law and Compliance Division. This notice was offered as an example of euro-related disclosure an FCM could use to inform customers of the effects of the EMU.
Under Commission Regulations 1.16 and 1.12, FCMs and IBs must report "material inadequacies." Commission Regulation 1.16(d)(2) defines a material inadequacy as, among other things, a condition that could contribute to an applicant or registrant being unable to discharge its responsibilities to customers. These include being able to process customers' trades, and providing monthly and confirmation statements as required by Commission Regulation 1.33. The Commission reminds FCMs and IBs that any "material inadequacy" related to the euro must be reported in accordance with Commission Regulation 1.16(e)(2).
Customers who trade futures and option contracts denominated in the legacy currencies on U.S. contract markets and on foreign boards of trade are potentially affected. In particular, the size of these customers' positions, the margin and settlement currency, and the form and/or contents of their monthly statements may be affected. Accordingly, the Commission requests that FCMs and IBs who have not already done so determine to what extent information of the type included in the FIA's notice should be provided to affected customers or their investment managers.