Notice of Revision of Commission Policy Regarding the Listing of New Futures and Option Contracts by Foreign Boards of Trade That Have Received Staff No-Action Relief to Provide Direct Access to Their Automated Trading Systems From Locations in the United States

[Federal Register: April 18, 2006 (Volume 71, Number 74)]
[Notices]
[Page 19877-19878]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18ap06-40]


[[Page 19877]]

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COMMODITY FUTURES TRADING COMMISSION


Notice of Revision of Commission Policy Regarding the Listing of
New Futures and Option Contracts by Foreign Boards of Trade That Have
Received Staff No-Action Relief to Provide Direct Access to Their
Automated Trading Systems From Locations in the United States

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice.

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SUMMARY: The Commodity Futures Trading Commission (Commission) is
revising its policy that permits foreign boards of trade that provide
direct access to their automated trading systems from locations in the
U.S. pursuant to a Commission staff no-action letter to list certain
additional futures and option contracts on the basis of a one business
day notification and without obtaining supplemental no-action relief
and, in its place, establishing a ten business day advance notification
requirement.

EFFECTIVE DATE: The new notification requirement is effective
immediately.

FOR FURTHER INFORMATION CONTACT: Duane C. Andresen, Special Counsel,
Division of Market Oversight, Commodity Futures Trading Commission,
Three Lafayette Center, 1155 21st Street, NW., Washington, DC 20581.
Telephone: 202-418-5492. E-mail: [email protected].

SUPPLEMENTARY INFORMATION: On June 2, 1999, the Commission issued an
order which, among other things, withdrew proposed rules that would
have governed automated access to foreign boards of trade from the U.S.
(June 2 Order) \1\. The June 2 Order also instructed the Commission
staff to begin immediately processing no-action requests from foreign
boards of trade seeking to place trading terminals in the United
States, and to issue responses where appropriate, pursuant to the
general guidelines included in the Eurex (DTB) no-action process,\2\ or
other guidelines established by the Commission.\3\ Pursuant to those
guidelines, foreign boards of trade were issued staff no-action letters
permitting them, without obtaining contract market designation, to
place in the U.S. electronic trading devices that provided direct
access to the boards of trade (Foreign Terminal No-Action Letters).
Foreign boards of trade that received Foreign Terminal No-Action
Letters that wished to list additional futures and option contracts for
trading through their U.S.-located trading systems were required to
request in writing and receive supplemental no-action relief
(Supplemental Relief) from Commission staff prior to doing so.
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    \1\ Access to Automated Boards of Trade, 64 FR 32829 (June 18,
1999).
    \2\ In February 1996, Commission staff issued no-action relief
to Deutsche Terminborse (DTB), an automated international futures
and options exchange headquartered in Frankfurt, Germany, that
permitted DTB, subject to certain terms and conditions, to place
computer terminals in the U.S. offices of its members for principal
trading. See CFTC Interpretative Letter No. 96-28 (1996-1997
Transfer Binder) Comm. Fut. L. Rep. (CCH) para. 26,669 (Feb. 29.
1996). In June 1998, DTB merged with the Swiss Options and Financial
Futures Exchange and DTB changed its name to Eurex Deutschland.
    \3\ 64 FR 32829, 32830 (June 18, 1999).
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    On June 30, 2000, the Commission issued the Statement of Policy of
the Commodity Futures Trading Commission Regarding the Listing of New
Futures and Option Contracts by Foreign Boards of Trade That Have
Received Staff No-Action Relief to Place Electronic Trading Devices in
the U.S. (Statement of Policy).\4\ Pursuant to the Statement of Policy,
foreign boards of trade that had received Foreign Terminal No-Action
Letters and that wished to list additional futures and option contracts
for trading through their U.S.-located trading systems were no longer
required to obtain Supplemental Relief prior to doing so. Instead, the
foreign board of trade was required to file the following with
Commission staff no later than the business day preceding the initial
listing of such futures and option contracts: (1) A copy of the initial
terms and conditions of the additional futures and option contracts the
foreign board of trade intended to list for trading through its U.S.-
located electronic devices and (2) a certification from the foreign
board of trade that it is in compliance with the terms and conditions
of the Foreign Terminal No-Action Letter that it has received and that
the additional futures and option contracts would be traded in
accordance with such terms and conditions.\5\
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    \4\ 65 FR 41641 (July 6, 2000).
    \5\ The Statement of Policy did not apply to futures and option
contracts that are covered by Section 2(a)(1)(B) of the Commodity
Exchange Act (Act). Foreign boards of trade would continue to be
required to seek and receive written supplemental no-action relief
from Commission staff prior to offering such contracts through U.S.-
located trading systems.
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    The Commission is hereby rescinding the Statement of Policy and
revising the advance notification requirement in light of its
experience since the issuance of the Statement of Policy and in
recognition of the fact that the listing of new products may raise
previously unidentified regulatory issues. For example, certain foreign
board of trade contracts directly accessible in the U.S. may be
directly linked to a U.S. designated contract market's (DCM) prices and
thus may create a need for enhanced market surveillance or additional
information sharing with the foreign board of trade and/or its
regulator to address market integrity issues with respect to the
Commission's oversight of the DCM's contracts. The Statement of Policy,
which permits contracts to be listed for trading through the U.S.-
located trading system on a one-business day notice-only basis, may
preclude ensuring that relevant regulatory issues are addressed prior
to such listing and may undermine staff's ability to assess important
surveillance issues, among other things, that need to be examined.
Extending the advance notification period from one to ten business days
would give Commission staff the opportunity to review the terms and
conditions of proposed additional contracts to address any regulatory
issues raised prior to the contract being made available for trading
through the U.S.-located trading system.
    Henceforth, foreign boards of trade that have received Foreign
Terminal No-Action Letters that wish to list additional futures and
option contracts for trading through their U.S.-located trading systems
must notify the Division of Market Oversight (Division) ten business
days prior to offering such contracts.\6\ In its notification, the
foreign board of trade need only submit a copy of the initial terms and
conditions of the additional contracts and a certification that it is
in compliance with the terms and conditions of the Foreign Terminal No-
Action Letter that it has received and that the additional futures and
option contracts would be traded in accordance with such terms and
conditions. The foreign board of trade can list the additional futures
and option contracts for trading ten business days after the date of
receipt by the Commission of the notification, unless Commission staff
notifies the foreign board of trade that additional time is needed to
determine if there is a need, for example, for enhanced market
surveillance or additional information sharing. Commission staff
reviews of proposed additional contracts for which there may be a need
to address such

[[Page 19878]]

regulatory issues would be completed as expeditiously as possible.
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    \6\ Foreign boards of trade continue to be required to seek and
receive written supplemental no-action relief from Commission staff
prior to offering through U.S.-located trading systems futures and
option contracts that are covered by Section 2(a)(1)(B) of the Act.
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    The trading of all contracts through electronic trading devices
that provide access to foreign boards of trade from within the U.S.
continues to be subject to the terms and conditions of the Foreign
Terminal No-Action Letter issued to the particular foreign board of
trade. Included among those terms and conditions is the requirement
that the foreign board of trade promptly provide the Division with
written notice of any material change in the structure, operation or
regulation of the foreign board of trade or its trading system.
Further, this notice does not alter the analysis that Commission staff
uses when considering requests for Foreign Terminal No-Action Letters,
dictate the result of that analysis, or alter the authority of
Commission staff to condition, modify, suspend, terminate, or otherwise
restrict the no-action relief that it issues.

    Issued in Washington, DC, on April 14, 2006 by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 06-3733 Filed 4-17-06; 8:45 am]

BILLING CODE 6351-01-P