Foreign futures and options transactions: Withdrawn,

[Federal Register: June 18, 1999 (Volume 64, Number 117)]

[Proposed Rules]

[Page 32829-32830]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr18jn99-29]

COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1 and 30

Access to Automated Boards of Trade

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed rules; withdrawal.

SUMMARY: On March 24, 1999, the Commission issued proposed rules to permit the use in the United States of automated trading systems providing access to foreign electronic boards of trade. The Commission has decided to withdraw these proposed rules.

FOR FURTHER INFORMATION CONTACT: David M. Battan, Chief Counsel, Lawrence B. Patent, Associate Chief Counsel, or Charles T. O'Brien, Attorney Advisor, Division of Trading and Markets, Commodity Futures Trading Commission, 1155 21st Street, N.W., Washington, D.C. 20581. Telephone (202) 418-5450.

SUPPLEMENTARY INFORMATION: The Commission had first sought public comment on these matters in a concept release published July 24, 1998, followed by the proposed rules published in March. After an extension was granted at the request of a number of industry participants, the comment period on the proposed rules closed on April 30, 1999. During the comment period, the Commission held a Public Roundtable as well as a meeting of its Global Markets Advisory Committee (``GMAC'') to discuss these matter.

On June 2, 1999, the Commission issued an order withdrawing the proposed rules and instructing the staff ``to begin immediately processing no-action requests from foreign boards of trade seeking to place terminals in the United States, and to issue responses where appropriate, pursuant to general guidelines included in the Eurex (DTB) no-action process,\1\ or other guidelines issued by the Commission, to be reviewed and applied as appropriate on a case-by-case basis.'' See Order of the Commission (June 2, 1999). In the same order, the Commission determined to ``commit to simultaneously initiate processes to address the comparative regulatory levels between U.S. and foreign electronic systems so as not to

[[Page 32830]]

provide one with a competitive advantage.'' Id.

\1\ In February 1996, the Commission's Division of Trading and Markets (``Division'') issued a no-action letter to the Deutsche Terminborse (``DTB'' or ``Eurex''), an all-electronic futures and option exchange headquartered in Frankfurt, Germany, in which the Division agreed, subject to certain conditions, not to recommend enforcement action to the Commission if Eurex placed computer terminals in the U.S. offices of its members.

As with the rapid developments in technology overtaking other industries, the growth of electronic exchanges and the placement of cross-border futures and option trading systems in the United States raise some of the most basic and fundamental issues facing the Commission and the futures industry. Among the critically important questions that need to be addressed are what role intermediation will play when technological developments make access to global markets far easier than before; what the future relationships will be between and among customers, futures commission merchants, exchanges, technology providers, and regulators; and how to provide a level-playing field and foster fair competition in the context of electronic trading systems between domestic and foreign market participants and between exchanges and FCMs while maintaining the protection of customers and the safety and soundness of larger and faster global markets.

The Commission's July 1998 concept release was by necessity of a general nature, and the resulting comments were not able to address with specificity all of these difficult issues. Only with the release of the proposed rules have all of the interested parties focused fully on all of the specific questions at hand. Moreover, even in just the past few months, the technology and the business relationships among the various constituents in the futures industry have changed substantially, and continue to do so. In any event, the result of all this, as evidenced by the comments received on the proposed rules, and by the wide-ranging positions outlined at the recent Roundtable and GMAC meetings on these issues, is that further consensus among the various affected parties must be sought before rules or guidelines may be finalized in this area. In this environment, the Commission determined to withdraw its proposed rules and defer adoption of final rules or guidelines pending further consideration of these issues by the Commission.

Issued in Washington, D.C. on June 11, 1999 by the Commission. Jean A. Webb, Secretary of the Commission.

U.S. Commodity Futures Trading Commission

Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581

June 2, 1999.

Order of the Commission

It is hereby ordered that the Commodity Futures Trading Commission shall, effective immediately:

Lift the moratorium and instruct the 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, or other guidelines established by the Commission, to be reviewed and applied as appropriate on a case-by-case basis;

Commit to simultaneously initiate processes to address the comparative regulatory levels between U.S. and foreign electronic trading systems so as not to provide one with a competitive advantage; and

Withdraw the proposed rules regarding access to automated boards of trade and proceed expeditiously toward adoption of rules and/or guidelines.

Dated: June 2, 1999. Commissioner Barbara P. Holum.

Dated: June 2, 1999. Commissioner David D. Spears.

Dated: June 2, 1999. Commissioner James E. Newsome.

[FR Doc. 99-15441Filed6-17-99; 8:45 am]

BILLING CODE 6351-01-M