WASHINGTON (HedgeWorld.com) – After an open meeting in which Michael Gorham, director of the division of market oversight, laid out his staff’s views, the Commodity Futures Trading Commission unanimously approved designation of the U.S. Futures Exchange LLC as a designated contract market.
Wednesday’s meeting of the CFTC attracted a lot of attention. Chairman James E. Newsome joked, “I’ve never seen so many ties on our staff as this morning … you guys are looking great.” He soon introduced Dr. Gorham, who presented the case for approval, subject to certain undertakings that the CFTC has negotiated with USFE, also known as Eurex US.
“There is nothing in the act or in the regulations that causes us, or even allows us, to discriminate between those [applicants] that are foreign owned and those that are not,” Dr. Gorham said.
In response to some of the specific issues raised in connection with this application, Eurex has undertaken not to use any clearing organization that is not approved by the CFTC; to provide to the CFTC, one month in advance of its proposed effective date, notice of any non-traditional fee or incentive program; and to refrain from operating the BrokerTec Futures Exchange in reliance upon the designation the BTEX previously received. Eurex purchased BrokerTec in mid-January Previous HedgeWorld Story.
That latter point set off some discussion between commissioners and staff over the transferability of designated contract market status in general.
Last year, there was a transfer of half of the ownership of NQLX, a single-stock futures exchange. Nasdaq transferred its half to its original partner in that venture, LIFFE, now Euronext.liffe. In that case, according to general counsel Patrick McCarty, the designated contract market status remained uninterrupted because the CFTC received proper notice of the change and the change in ownership did not result in any change in the operations of the exchange. Accordingly, change of ownership was not a means for evading the application process.
In the case of Eurex, the applicant represented that it had not purchased BrokerTec as part of any effort to end-run that process, and in order to assure the regulators of this it undertook not to rely on BrokerTec’s designation.