Press Release

PN/SIB/053/96 Embargoed until 15.30 (UK time)

26 November 1996

COMMODITY DERIVATIVES REGULATORS SET OUT PROGRAMME TO STRENGTHEN SUPERVISION OF INTERNATIONAL MARKETS

Regulatory authorities and representatives from 17 countries responsible for the supervision of many of the world's leading commodity futures markets have today issued a Communique setting out their proposals to develop and to strengthen arrangements and practices for the supervision of international commodity futures markets. The Communique follows a meeting in London jointly chaired by the US Commodity Futures Trading Commission ("CFTC"), the Japanese Ministry of International Trade and Industry ("MITI") in conjunction with the Japanese Ministry of Agriculture, Forestry and Fisheries, and the UK Securities and Investments Board ("SIB").

The Communique recognises that the liberalisation of international trade has resulted in the increased importance of commodity futures markets around the world. It is therefore appropriate for the regulators of these markets to address the additional supervisory implications of these developments.

The regulatory authorities agreed on a range of key elements in enhancing standards and best practice in the areas of contract design, market surveillance and information sharing and cooperation, and agreed on a programme of further work to increase understanding of existing arrangements and practices in different jurisdictions and to develop and to strengthen these procedures.

Welcoming the Communique, CFTC Chairperson Brooksley Born said: "The consensus reached at this meeting and the future steps planned will enhance world-wide regulation of these markets and international cooperation concerning them."

The Director General of the MITI, Hidehiro Konno said: "I am very pleased with the outcome of the meeting. We have succeeded in establishing a broad framework for international cooperation among regulatory bodies which includes, among other points, establishing an information sharing network and promoting the development of best practices for contract design and market surveillance."

The Chairman of the SIB, Sir Andrew Large, said: "I am pleased that this first meeting devoted to the specific area of the supervision of commodity futures markets has been so successful and constructive. Supervisors have a responsibility to respond to the significant increases in activity in international commodity derivatives, which in turn arise from the liberalisation of international trade and markets. I believe we have agreed to a challenging programme of work which will enable supervisors to continue to respond to these developments. The markets themselves and the wider industry will have an important role to play in this work."

Notes to Editors

1.The meeting took place over 25 and 26 November in London and was attended by representatives from the regulatory authorities of Australia, Brazil, Canada, China, France, Germany, Hong Kong, Hungary, Italy, Japan, Korea, Malaysia, The Netherlands, Singapore, South Africa, the United Kingdom, and the United States of America.

2.A copy of the Communique is attached.

PRESS ENQUIRIES:

CFTC:Telephone:+ 1 202 418 5080

Contact:John Phillips

MITI:Telephone:+ 81 3 3501 6683

Contact:Kimitsugu Namura, Commercial Affairs Office

The SIB:Telephone:+ 171 638 1240

Contact:Betty Powell/ John Whitmore

ext. 2181/2102 outside office hours 046-874-2044

REPRESENTATIVES OF REGULATORY AUTHORITIES FROM 17 COUNTRIES RESPONSIBLE FOR SUPERVISING COMMODITY FUTURES MARKETS (COLLECTIVELY "THE AUTHORITIES") MET ON NOVEMBER 25 AND 26 IN LONDON IN THE UNITED KINGDOM TO ADDRESS THE OVERSIGHT OF COMMODITY FUTURES MARKETS AND ISSUED THE FOLLOWING:

LONDON COMMUNIQUE ON SUPERVISION OF COMMODITY FUTURES MARKETS

THE AUTHORITIES RECOGNISED THAT:

THE AUTHORITIES further recognised the substantial progress that has been achieved in other international fora with respect to market supervision and cooperation and the relevance of such developments to this meeting's agenda. The Authorities noted, however, that no forum to date has addressed the particular concerns raised by markets whose underlying product is a physical commodity.

THE AUTHORITIES addressed on a multilateral basis the special concerns raised by commodity futures markets and identified where further work could enhance their ability to supervise the markets subject to their respective jurisdiction, in particular in the following areas:

I THE AUTHORITIES REACHED THE FOLLOWING POINTS OF CONSENSUS

That the proper design of commodity contracts

That an active and effective market surveillance programme by the market regulatory authorities

That market authorities of related markets should share to the extent permitted by their laws, rules and regulations surveillance information to manage a market disruption and should designate contact persons for such purposes.

That regulatory measures which facilitate the identification of large exposures should be developed. These measures may involve access to information relating to persons holding or controlling such large exposures and their related derivatives, over-the-counter and cash market positions. These measures may also involve access to information on deliveries.

That information may be necessary (1) about the normal operation of markets; (2) when strong concerns exist about potential abusive conduct; or (3) when corrective actions or sanctions may be warranted.

That the information shared should be obtained for the regulatory purposes of the requesting market authority only and should not be used for any other purposes.

That market authorities will keep confidential the request for information and information exchanged, consistent with the needs including the laws and regulations in force in the jurisdiction of the requested authority and with the domestic laws and regulations in force in the jurisdiction of the requesting authority. In no event will they use a degree of care less than that employed to protect the confidentiality of equivalent domestic information.

II THE AUTHORITIES AGREED TO PROMOTE

With respect to contract design

With respect to market surveillance

With respect to information sharing

III THE AUTHORITIES RECOMMENDED THAT FURTHER WORK SHOULD BE UNDERTAKEN TO CONSIDER

With respect to enhancing clarity of existing practices and procedures:

With respect to contract design:

With respect to market surveillance:

With respect to information sharing:

Work Programme

It was agreed that the work will be undertaken immediately by two working parties drawn from the participants in the meeting. The first working party will address issues arising from contract design. The second will address concerns relating to market surveillance and information sharing. The working parties will consult interested parties as necessary. It is the intention that the work will be completed within 12 months and a further meeting will be convened in Japan at that time.

ANNEX 1

PARTICIPANTS IN THE LONDON MEETING

AUSTRALIA

Australian Securities Commission

BRAZIL

Comissao de Valores Mobiliarios

CANADA

Canadian Grain Commission

PEOPLE'S REPUBLIC OF CHINA

China Securities Regulatory Commission

FRANCE

Commission des Operations de Bourse

GERMANY

Bundesaufsichtsamt fur den Wertpapierhandel

HONG KONG

Securities and Futures Commission

HUNGARY

State Securities and Exchange Commission

ITALY

Commissione Nazionale per le Societa e la Borsa

JAPAN

Ministry of International Trade and Industry

Ministry of Agriculture, Forestry and Fisheries

KOREA

Embassy of the Republic of Korea

MALAYSIA

Commodities Trading Commission

THE NETHERLANDS

Securities Board of the Netherlands

SINGAPORE

Singapore Trade Development Board

SOUTH AFRICA

Financial Services Board

UNITED KINGDOM

The Securities and Investments Board

UNITED STATES OF AMERICA

Commodity Futures Trading Commission