CHICAGO (HedgeWorld.com)–Despite concerns over the very brief comment period and arguments over the anti-competitive effects of one aspect of the new linkage, the Commodity Futures Trading Commission voted to approve the rules submitted by the two Chicago-based futures exchanges under which the Chicago Mercantile Exchange will provide clearing services for the Chicago Board of Trade.
The president of the Futures Industry Association had been among those who complained that the CFTC should have allowed more time for public comment on these rules.
John Damgard, in a statement July 11, objected that the CFTC announced its plan to approve of these rule changes on July 8 and only allowed concerned parties until noon July 14 to comment, a period of only three business days Previous HedgeWorld Story.
“We recognize the desire to proceed in a fashion that does not delay the implementation of the CBOT-CME clearing link,” he said. “We certainly see a number of positive aspects to this link, such as the potential cost savings. However, we believe it is important for the CFTC to carefully consider the implications of determining that the implementing rules comply with the Commodity Exchange Act.”
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Notwithstanding the time pressure, the FIA did submit comments by the deadline. Its comments focused on the proposed new CBOT regulation 701.01, which requires each member of that exchange to “comply in all respects with any statement of policy or other notice issued by an exchange relating to the procedures and processes that must be followed to effectuate the transfer of open positions to any clearing services provider.”
This is troublesome because the language is not limited to the CBOT/CME link. The language appears to authorize the CBOT’s board of directors, simply by issuing a new statement of policy, to direct its clearing members to transfer all open positions to any other derivatives clearing organization it might select, thereby abrogating existing contractual relations to which the CBOT itself is not a party.
The FIA also expressed concern about the clearing services agreement between the CBOT and the CME.
“Although this agreement is apparently on file with the Securities and Exchange Commission, we understand that it has not been filed with the [CFTC]. Our initial review of this agreement has raised a number of questions that we believe the [CFTC] should address before the link receives final approval.”