Release:                      #4290-99
For Release:              July 20, 1999


Washington, D.C.--The Commodity Futures Trading Commission (CFTC) is proposing a far-reaching and fundamental change to its approval procedures for new futures contracts offered on United States exchanges. Specifically, the CFTC is proposing a two-year pilot program to permit the listing of futures and option contracts on U.S. exchanges prior to CFTC review and approval. This pilot program responds to U.S. futures exchanges' concerns that their ability to list new contracts without delay is important to their continued competitiveness, particularly with foreign exchanges.

The CFTC is proposing this rule under the broad exemptive authority provided in Section 4(c) of the Commodity Exchange Act. The proposal reduces any regulatory impediment to a U.S. exchange's ability to introduce new contracts without delay. This procedure, together with changes the CFTC recently proposed to its review and approval procedures for changes to existing contract rules (News Release #4287-99, July 16, 1999), will significantly increase U.S. exchanges' flexibility in listing new contracts to respond to perceived competitive threats and in amending existing contracts.

In announcing today's CFTC action, Acting Chairman David Spears said: "I see this important regulatory relief measure as one more step in an ongoing process. This proposal demonstrates the Commission's continuing commitment to address the regulatory and competitiveness concerns of U.S. exchanges. Those concerns will remain a top priority of the agency as we move forward in the days and weeks ahead."

The proposed pilot procedure would be available to any exchange that is already approved to trade at least one futures or option contract. It would apply to any contract that is not already pending with the CFTC for approval under the existing review and pre-approval procedures. As proposed, exchanges choosing to use the pilot procedure would only be required to file the contract's terms and conditions with the CFTC by close of business on the day prior to first listing a new contract and could thereafter list trading months up to one year in the future. The exchange would also be required to file with CFTC within forty-five days of first listing the contract an application for approval of the contract. The exchange would be required to identify the contract as being listed pending Commission approval. The proposed procedure could not be used to list a new contract that is the same as an existing contract, which is subject to an adverse Commission proceeding. The procedure would not be available for stock-index contracts, which require prior concurrence by the SEC.

The proposed procedure preserves the public interest in having the Commission review and approve new contracts to ensure their market integrity by requiring exchanges to submit contracts for approval after listing, and by permitting trading months to be listed only one year out prior to approval. Any problems identified by the Commission in its review of a recently listed contract could therefore be rectified within a short time of its initial listing.

As proposed, U.S. exchanges would also retain the choice to proceed under the current procedures for approval of new futures and option contracts. The current procedures provide for review and approval of new contracts by the CFTC before the contracts are listed for trading. They include an innovative fast-track review procedure introduced in 1997, which limits the review time to either ten or forty-five days.