December 16, 2003

Ms. Jean A. Webb

Secretary to the Commission

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

Re: US Futures Exchange LLC DCM application

Dear Ms. Webb:

My name is Nickolas J. Neubauer and I was Chairman of the Chicago Board
of Trade between 2001 and 2003. During my term, we essentially invited
Eurex to compete with the CBOT in the United States when we chose Liffe
Connect as our electronic matching engine replacing Eurex. In other
words, we at the CBOT have [no]{.underline} problem with competition;
Eurex is coming here because of OUR decision.

I am writing this comment letter to make one simple point: your agency
must fully review the Eurex U.S. application as to its planned means and
methods of operations to ensure that these means and methods meet the
standards of a fair, open and transparent marketplace.

You should be aware that the heads of major firms favoring the Eurex
U.S. application say they are doing so because they want European market
practices introduced here, e.g., crossing, blocking with delayed
reporting, call around, prearrangement, internalization . In fact, one
firm leader said the CBOT would not permit these things because it was
"very principled".

I respect these firm leaders for their candor ; they sincerely believe
that these practices should be acceptable, although some misgivings and
caveats are expressed. But over the last few years, we in the U.S. have
come to understand that investors and customers generally must be
protected by regulation from market practices that are infused with
potential conflicts of interest.

"Competition" about lower fees or electronic trading is perfectly
appropriate. Degrading market regulation as a competitive tool to get
orders is not because it disadvantages customers and injures the overall
market.

As we know, the mixing of principal and agent is at the heart of today's
loss of confidence in financial markets, e.g., analysts shading their
opinions to win investment banking business, auditing firms selling
consulting services and neglecting their responsibility as public
accountants. The SEC is dealing with issue after issue of subtle
conflicts that were previously thought to be \"okay.\"

"Competition" that degrades the overall market to the detriment of
customers should not be permitted. Was it okay for a mutual fund to
compete for assets by allowing large hedge funds late trading
privileges? Obviously not.

Should it be left to the marketplace and the customer to figure out
whether his fund does this and supposedly no matter how he is taken
advantage of, it is okay because he had a choice of what funds to invest
in and he just made the wrong choice?

Off market block trading with delayed reporting, pre-arranged trading
and internalization in general are the same sort of subtle degradations
of the market and of fiduciary responsibility that have to be prohibited
by regulation and not simply ignored with the hope that the marketplace
will sort it out.

The fact is that Eurex US is likely to promote a market structure like
the one it has in Europe, where there is a fragmented market, a lack of
transparency and conflicts of interest between customer and firm because
the firm is both principal and agent.

Donald R. Wilson, Jr. testified before the House Agriculture Committee
on November 6, 2003. Mr. Wilson is the head of a major trading firm and
is fully familiar with trading in the U.S. and Europe. His conclusion:

\"Although competition among exchanges can be positive for futures
markets and their users, it is important that certain issues be
carefully considered before approving a new exchange. Paramount is
whether an exchange will ultimately provide a centralized, transparent
marketplace where prices can be efficiently discovered and all market
participants are treated fairly. The Commodity Futures Trading
Commission recognizes this by stating in its mission statement that:

> The agency protects market participants against manipulation, abusive
> trade practices and fraud. Through effective oversight and regulation,
> the CFTC enables the markets to serve better their important functions
> in the nation's economy providing a mechanism for price discovery and
> a means of offsetting price risk.

If Eurex US successfully recreates the market structure of its European
counterpart, then these principles will be abandoned. All market
participants will be disadvantaged by a lack of transparency. Payment
for order flow and internalization of orders will not only create
conflicts of interest, particularly towards customers, but will also
lead to higher transaction costs for all market participants. As a
result, hedging activity will decline, resulting in greater earnings
variance, and ultimately lower economic growth.\"

I know that both the CFTC and the SEC take their responsibilities for
market regulation and practices very seriously. Consequently, I ask that
the Eurex U.S. application be reviewed carefully so that its planned
means and methods of operation meet the standards of a fair, open and
transparent marketplace.

Respectfully submitted,

Nickolas J. Neubauer