Statement of Commissioner Sharon Brown-Hruska
Commodity Futures Trading Commission
USFE Designation Hearing
February 4, 2004
Thank you, Mr. Chairman. It is a pleasure to finally gather here today for what may someday be seen as an historic moment in the history of futures trading, both in this country and globally. I also would like to recognize the efforts of the staff.
In the Commodity Exchange Act, Congress instructs the Commission “to promote responsible innovation and fair competition among boards of trade, other markets and market participants.” This morning we are gathered to consider an application consistent with this instruction of the Act. As we are all aware, the application of the US Futures Exchange to become a designated contract market has raised a number of unique and challenging issues. The staff has not only had to endeavor to be inquisitive and thorough in their task, but open minded and fair. In short, in light of the issues raised throughout the application process, the staff had to get to the bottom things. In this respect, the staffs of the Divisions of Market Oversight and Clearing and Intermediary Oversight have worked tirelessly in this effort. I would especially like to thank and congratulate Mike Gorham and Jim Carley for the work they have put into this effort and ask them to personally extend my thanks to those in their divisions who have put in the countless hours and who have sacrificed evenings, weekends and holidays to get us to where we are today.
I would also like to commend you, Chairman Newsome, for your astute management of the challenges posed by this market designation and your leadership on this issue. I look forward to our deliberation today and thank you for the opportunity to consider this matter.
As a student of markets for many years, the significance of the US Futures Exchange’s application for designation as a designated contract market is not lost on me. The rise of EUREX, the parent of US Futures Exchange, and its successful endeavor to establish an electronic marketplace in Europe for futures trading was probably the most significant innovation in the futures industry since the Chicago Board of Trade invented the first financial futures contract on GNMA mortgaged-backed certificates in 1975. Ironically, these two great exchanges, which have recently worked as partners to establish electronic trading in the United States, are now poised, along with another great exchange, the Chicago Mercantile Exchange, to vie as competitors in the markets.
Certainly, this has raised consternation with some with the thought of a foreign entity attempting to move in on what has been for more than a century an American institution. But as with other sectors of the economy, and perhaps most notably so, the financial sector, the futures markets are increasingly a global industry. I would note, however, that without the Chicago Board of Trade and the Chicago Mercantile Exchange and the innovations they have brought to the futures industry, we would not sit here today discussing EUREX or its startup exchange, the US Futures Exchange. Moreover, without the assistance of these two American exchanges, it is unlikely that we would have seen the establishment and growth of futures markets across Europe and Asia to the extent that we have. I do not expect for one second that these exchanges will rest on their laurels. I expect them to build on their substantial competitive advantages and to take their innovative spirit to an even higher level, in products, markets, and services here and abroad.
As an advocate of global markets and the economic potential that such markets create, I look forward to the innovations and progress that will come from the competition between the exchanges. In fact, before the US Futures Exchange has even traded one contract, we have seen the benefits of competition in the form of lower exchange trading fees for customers. As I have mentioned in the past to many of you here, I am a strong proponent of the development of global clearing links that offer the promise of greater capital efficiency and potential savings for customers in the hundreds of millions of dollars. I look forward to learning the details of these developments in the coming months.
And for the city of Chicago, there is the prospect of another gem to be added to their crown of futures marts. Contrary to the parochial concerns and dire predictions that have surfaced throughout the extended comment period, I believe that the entry of the US Futures Exchange into the US futures industry will usher in a new era of futures trading in the United States and globally. As we have seen in other markets, as in the US options markets for example, I do not believe that this will be a winner-take-all proposition. I believe that all will be winners, that volumes will continue to expand as more users are attracted to the options and futures markets, and our markets will evolve to offer more useful risk management products to consumers and investors both here and abroad.
It is thus my pleasure to cast a vote today in the application of the US Futures Exchange as a designated contract market. I would also like to take this opportunity to wish all of the exchanges success in their future endeavors. And I would also like to thank the exchanges and all those who provided comments, advice, and even criticisms. These comments make us think more thoroughly about these issues. Your input has made us do a better job and I for one, appreciate the opportunity to fully consider this matter and render my decision.