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WFE Focus February 2011
Proposed Foreign Board of Trade registration changes
in the US

Dear WFE Member Exchanges:

Given that the WFE promotes high standards for markets, growth of the regulated exchange model, and international coordination among regulators, CME Group would like to draw your attention to a recent proposal by the U.S. Commodity Futures Trading Commission (CFTC) that could limit competition by "Foreign Boards of Trade" (FBOTs) in U.S. derivatives markets and undermine global coordination among regulators. While many of the issues raised by the CFTC's proposal on FBOTs are technical in nature, the overarching implications of the proposed rule changes are that considerable additional burdens would be placed on FBOTs without adding corresponding benefits.

In CME Group's view, reducing or limiting barriers to entry in the global futures and options industry has strongly contributed to business growth and increased competition. This growth is due, at least in part, to the fact that U.S. market participants can directly and electronically trade foreign futures and options contracts from the U.S. Correspondingly, non-U.S. based investors can directly and electronically trade products listed by CME Group Exchanges and other U.S. futures and options exchanges. Moreover, FBOTs can efficiently offer U.S. customers access to products also traded on U.S. exchanges, thereby increasing global competition in these markets.

CME Group submitted a comment letter to the U.S. CFTC on this topic. In the letter, we note our concern with the proposed prescriptive rules-based approach and advocate for an approach which focuses on a "comparability" analysis of whether the FBOT is subject a regulatory regime by its home country regulator that is comparable to the U.S. regime.

Craig S. Donohue
CME Group

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