July 8, 2015

Office of Exemption Determinations

Employee Benefits Security Administration

Attention: D–11712

U.S. Department of Labor

122 C Street, NW

Suite 400

Washington DC 20001

and

Office of Regulations and Interpretations

Employee Benefits Security Administration

Attn: Conflict of Interest Rule and Related Exemptions

Room N-5655

 Re: Conflict of Interest Rule and Related Exemptions, ZRIN: 1210–ZA25 and RIN: 1210-AB32

 The Intercontinental Exchange, Inc. (“ICE”) appreciates this opportunity to comment on the 

Department of Labor’s (“DOL”) proposed rules on fiduciary duties and in particular, the Best Interest 

Contract (“BIC”) exemption.1 As background, ICE operates markets in North America, Europe and Asia, 

including derivatives central counterparties (“CCPs”), securities and derivatives exchanges including the 

NYSE Amex and NYSE Arca options markets. Our exchanges list futures, options on futures and options 

on securities which would be affected by the BIC exemption. 

Executive Summary

 The DOL has expanded the proposed prohibited transaction rules that apply to ERISA plans

 The exemptions from the prohibited transaction rules do not include exchange-traded futures, 

exchange-traded options on futures, or exchange-traded options on securities, which all form crucial 

components of a well balanced portfolio.

 Failure to correct this issue will be detrimental to American savers, potentially leaving retirement 

portfolios subject to greater risk, especially inflation risk. 

 The DOL should add exchange-traded futures, exchange-traded options on futures, and exchangetraded options on securities to the definition of “Asset” in the BIC exemption. 

 

1

80 Federal Register 21960 (Apr. 20, 2015)
Background

 Department of Labor proposed regulation expands the definition of the term “fiduciary,” for purposes 

of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the prohibited 

transaction provisions of the Internal Revenue Code of 1986, as amended (the “Code”). At the same time, 

the DOL proposed new exemptions to the prohibited transaction rules that apply to ERISA plans, such as 

401(k) plans, and individual retirement accounts (“IRAs”). The BIC exempted “Assets” are defined as bank 

deposits, CDs, shares or interests in registered investment companies (mutual funds), bank collective funds, 

insurance company separate accounts, exchange-traded REITs, exchange-traded funds, corporate bonds 

offered pursuant to a registration statement under the Securities Act of 1933, agency debt securities, U.S. 

Treasury securities, insurance and annuity contracts (both securities and non-securities), guaranteed 

investment contracts, and exchange-traded equity securities. The enumerated list does not include 

exchange-traded futures, exchange-traded options on futures, or exchange-traded options on securities; 

therefore, the new prohibited transaction exemptions would not apply to options and futures transactions 

entered into by plans or IRAs with entities that are fiduciaries with respect to such plans or IRAs. Thus, if 

the regulation and exemptions are implemented as proposed, many plan and IRA accounts would no longer 

be able to engage in security options, futures, or options on futures transactions.

Importance of Futures, Options on Futures, and Options on Securities to Investment Portfolios

 Futures and options on futures have been used by investors as an integral component of a welldiversified portfolio for many years. Futures are highly flexible financial instruments with the potential to 

profit from rising and falling markets and have limited correlation to traditional asset classes, enabling them 

to provide the opportunity for enhanced returns and lower overall volatility.2 Diversification into unrelated 

assets is a tenant of modern portfolio theory and critical to protecting savings.3Further, investors also use

listed security options in their accounts to manage the risk associated with owning stock. IRA account 

owners can use conservative strategies such as selling “covered” call options or buying protective put 

options. Selling covered calls is the most popular options strategy employed in such accounts, and it is 

widely considered a conservative strategy to generate increased investment income from a stock position.

Buying protective puts reduce potential downside risk to investors in exchange for paying a fixed premium. 

These options on securities serve to help investors diversify and therefore decrease overall risk. 

 Therefore, exchange-traded futures, exchange-traded options on futures, and exchange-traded options 

on securities form critical parts of an investor’s diversified, hedged portfolio and are valuable tools to 

reduce overall portfolio risk. These instruments are traded on regulated exchanges and subject to the 

oversight of applicable regulatory authorities. Eliminating the ability of advisors to use futures, options on 

 

2

See,e.g. Managed Futures Portfolio Diversification Opportunities http://www.iasg.com/Articles/Education/Managed-FuturesPortfolio-Diversification-Opportunities In addition, futures and options on futures can serve as important hedge against inflation. 

See, e.g., Bodie, Zvi 1983. Commodity Futures as a Hedge Against Inflation, The Journal of Portfolio Management 9(3) (12-17). 

3

See Markowitz HM. 1952a. Portfolio Selection. J. Finance 7(1):77–91 (Professor Markowitz won the 1990 Nobel Prize in part 

based upon his theory of portfolio selection). 
futures or security options will be detrimental to retirement savings with little to no benefit to the DOL’s 

goals of protecting retirement savings. ICE believes this cuts against the goals of the proposed rulemakings. 

Conclusion

 ICE recommends that the DOL amend the definition of “Asset” be revised in the final version of the 

BIC exemption to include exchange-traded futures, exchange-traded options on futures, and exchangetraded options on securities. 

 If you have any questions, please contact me at 770.916.7832.

 Sincerely,

 

 Trabue Bland

 Vice President, Regulation

 Intercontinental Exchange, Inc.