CFTC’s Issuance of Foreign Boards of Trade Permits

The CFTC announced on October 31st, 2016 that they issued Orders of Registration to the following Foreign Boards of Trade (FBOT):

• Eurex

• CME Europe Limited

• ICE Futures Europe

• The London Metal Exchange

• London Stock Exchange
  
  

We congratulate these exchanges on their newly acquired Orders of Registration.

These Orders of Registration will allow FBOT members and other participants located in the U.S. direct access to the order entry and matching engine for these five exchanges. The CFTC issued these Orders in response to a request from the FBOTs for “the attributes of an established, organized exchange [that is] subject to continued oversight by a regulator that provides comprehensive supervision and regulation that is comparable to the supervision and regulation exercised by the CFTC.”

We want to highlight “supervision that is comparable.” This means that trading done by U.S. participants in the FBOTs must be done on a manner that complies with all foreign, as well as U.S. Dodd-Frank supervision and market manipulation requirements. Similarly, those Broker-Dealers and direct exchange access providers should consider having supervisory controls in place to account for both regimes.

International issues related to cross-border and multi-jurisdiction issues have been a larger industry concern over the past year. This has been highlighted by the extradition of Navinder Singh Sarao for spoofing on U.S. markets while trading from the UK, and the number of such cases will only increase.

It is our belief that market participants want the same level of open, transparent and risk neutral markets that each regulator is tasked with preserving. While it isn’t the CFTC’s responsibility to oversee the FBOTs exchange rules and practices, it is the responsibility of those FBOTs to foster the same environment.

Market participants, especially those who will avail themselves of this new avenue of trade, should be spending more time interacting with the market than worrying about the personal criminal liability associated.

We look forward to more open markets, better regulation, and supervisory control capable of safeguarding all those involved.