Introductory Remarks for GMAC's Ad Hoc Committee Meeting

New York -- June 17, 1999

Good morning ladies and gentlemen. I am very pleased that all of you could be here today.

As you know, the ad hoc committee was formed to address regulatory parity issues and their differential competitive effect in the context of screen-based trading. It is important to note that the Commission's Order of June 2 lifting the moratorium on foreign terminals includes terms calling for an analysis of regulatory parity that track similar provisions in a May 6 letter from Senator Lugar to then Chairperson Born. Of course, these concerns are in a direct sense what led to this ad hoc group's formation and its investigation of these competitive issues.

A threshold issue in this effort is whether terminal placement should be linked with the adoption of corrective measures addressing competitive inequalities as identified by this ad hoc group. There are several reasons that argue against such linkage. For one, the Commission's June 2 Order contemplates that action on these two fronts should move along their own independent tracks. Although not articulated in the Order, practical considerations support such an approach. Regulatory parity issues involve ongoing and changing developments. As such, they deserve continuous and regular examination to ensure that regulatory structures correspond to market and institutional realities.

This brings us to the immediate task of this ad hoc group -- the identification of areas where foreign and US regulation can and should be harmonized. The ad hoc committee has assumed this task, and the group's mission statement expresses it very well -- "to identify and recommend specific actions to ensure that US exchanges will not be competitively disadvantaged by disparities in US and foreign regulation." The meeting here today initiates that process and without doubt will provide valuable input to GMAC and, indirectly, to the Commission. With this in mind, I am hopeful that GMAC will be able to schedule a meeting in mid-July to take up the ad hoc group's recommendations.

While the institutional backdrop is a dynamic one, especially with respect to technology, it important to remember that the Commodity Exchange Act encourages adoption of such advances. Sections 18 and 12(g) instruct the Commission to maintain research and information programs on the feasibility of computer trading and other information technology systems. These provisions in the Act also direct the Commission to work with the US Trade Representative and the Departments of Treasury, Commerce, and State to eliminate trade barriers imposed by foreign nations on the international use of electronic trading systems.

I am certain that the interests represented here will provide valuable input to GMAC and I am looking forward to a productive process.