The Commodity Futures Trading Commission, the US futures and options industry regulator, has approved controversial rules submitted by the Chicago Mercantile Exchange and Chicago Board of Trade to establish a common clearing link.
The link is an agreement under which the CME will provide clearing and related services for all CBOT products. Under the terms of the link, clearing services are expected to begin in November.
The Futures Industry Association had protested about the short time-frame available to pass comment on the proposals, which stem from the Cbot's decision to sever its long relationship with Board of Trade Clearing Corporation in advance of the arrival of new competition from Swiss-German derivatives exchange Eurex.
In particular the FIA objected to regulations which would give the Cbot the authority to order clearing firms to abrogate the existing contractual relationships between themselves and the clearinghouse.
John Damgard, FIA president says: "These powers could be used not only in relationship to the CBOT-CME link but at any future time. This is a very broad rule, and we believe the industry deserves more time to consider its implications."
In approving the rules, the CFTC says it is aware of the industry controversy about the proposals, but contends: "The rules are necessary for the orderly implementation of the link and will provide continuity of financial integrity and customer protection in the futures markets."
The Commission says it welcomes further industry input on related policy issues regarding market structure and competition, but believes that this broader dialogue should not impede the planning to implement the common clearing link.
"The Commission believes that it is of paramount importance to enhance legal certainty concerning the procedures to implement the link so that all affected parties may make plans as necessary for a smooth and orderly transition beginning in November."