Received CFTC 

Records Section 1/~'t/ocr. 

NVSE Liffe 

By Electronic Mail 

January 28, 2009 

Mr. David A. Stawick 

Secretary 

Commodity Futures Trading Commission 

llSS 21 11 StreetNW 

Thomas F. Callahan 

President I Chief Executive Olllcer 

NYSEUI'e 

20 Broad Street, 1 Olh Floor 

New York, NY 1000S 

T +1 212 6S8 4300 

COMMENT 

. ,·, 

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Washington DC 20581 :. .. ~ > - -~ 

:-··~! c.-) 

Re: NYSE Lifl'e Comment on Proposed Rules for Trading Off the Centralized Market: -

73 Fed. Reg. 54097 (September 18, 2008) :~-: '-' i 

Dear Mr. Stawick: 

On behalf of NYSE Liffe, LLC ("NYSE Liffe"), 1 a Commodity Futures Trading 

Commission ("Commission") Designated Contract Market ("DCM''), I write with respect 

to the above-referenced Commission Notice of Proposed Rulem.aking. Specifically, 

NYSE Liffe opposes the CME Group's suggestion that the Commission's revised 

Guidance should prescribe a direct form of linkage for establishing minimum block trade 

thresholds between exchanges listing substantially identical products.2 

The CME Group proposes that the Commission's guidance provide that "[a]ny DCM 

listing a particular contract should set its block trade threshold size at the level which 

would constitute an appropriate minimum size for block trades on tM most liquid DCM 

which lists a substantially identical contract.',] 

We urge the Commission to reject the CME Group's proposed guidance and not include 

it in the Commission's final Guidance on Core Principle 9. The CME Group's proposal 

is contrary to the public interest to be protected by the antitrust laws and several key 

regulatory objectives that Congress set forth in the Commodity Exchange Act. 

1 NYSE Liffe is an indirect. wholly-owned subsidiary of NYSE Euronext, the holding company created by 

the combination ofNYSE Group, Inc. and EuronextN.V. NYSE Euronoxt operates the world's largest and 

most liquid exchange group and offers the most diverse array of tiftaneial products and services. NYSE 

Euronext, which -brings toptber six cash equities exchanges in five countries and six derivatives 

exchanges, is a world leader for listings, trading in cash equities, equity and interest rate derivatives, bonds 

and the distnbution of market data. 

z The CME Group's proposal was included in its comment letter dated Jaauary ~. 2009 to David A. Stawick, 

Secretary to the Commission from Craig S. Donohue, Chief Executive Officer, CME Group, tiled in 

connection with the above-referenced Notice of Proposed Rulemakiag ('"CME Group Letter"). 

3 Id. at4 

'; 
Mr. David Stawick 

January 28, 2009 

Page2 

First, though feigned as promoting a regulatory goal, the proposed guidance would have 

the direct effect of stifling much needed competition in the US Futures market. Per the 

CME Group, the sole claimed regulatory goal advanced by its proposed approach is that 

allowing a competing DCM to set a lower block threshold "could impair the usefulness of 

the price discovery information being provided by the previously listing exchange. , 4 To 

combat this theoretical, contingent threat, the CME Group's proposed guidance would 

simply serve to prevent a new, smaller DCM from competing freely by mandating that 

the new exchange should set an inappropriately high block trade threshold for its 

competing product which would bear no relevance whatsoever to the (nascent) liquidity 

of the new market or, therefore, the Commission's "customarily able to be filled" 

standard. By requiring a higher threshold than necessary for the smaller DCM, the CME 

Group's proposed guidance violates Section 15(b)'s directive that the Commission use 

the least anticompetitive means necessary to achieve the objectives of the Commodity 

Exchange Act. In the existing futures marketplace in the United States, where the CME 

Group controls over ninety-five percent of exchange-traded futmes activity, the CME 

Group's proposed guidance would in effect allow the CME to maintain a block trading 

monopoly, with the CME's existing dominant liquidity acting as a barrier to entry for any 

competing new exchange, setting a high water mark of block trade thresholds for the 

entire industry. Against this market backdrop, the unproven and highly theoretical threat 

that the CME Group cites does not justify the wholesale anticompetitive effect of 

allowing the CME Group in effect to be setting block trade thresholds for its competitors. 

Second, and more importantly, the CME Group's proposed guidance would undermine 

critical regulatory goals of the Commodity Exchange Act by actually promoting price 

distortions and trading disruptions, harming price discovery, and increasing hedging 

costs. The CME Group's proposed guidance would force relatively large orders placed 

on a smaller DCM into that exchanges' central order book. This could cause price 

distortions and raise execution risk. It would ultimately act as a tax on the investing 

public by raising the cost of hedging on all US futures exchanges. Such effects would be 

diametrically contrary to the purposes Congress set forth for the Commodity Exchange 

Act in Section 3(b). The contracts of the new, competing exchange would not fungible 

with those of the CME Group. Accordingly, any market participant who has made the 

choice to trade on the new exchange must be free to manage, adjust or close out his 

position under rules which are appropriate to, and properly reflect, the conditions and 

liquidity of that exchange and not another exchange. There are various reasons why a 

market user might choose to open a position under the terms of a competing contract 

4 Id. at 4 (emphasis supplied). 
Mr. David Stawick 

January 28, 2009 

Page3 

instead of a CME Group contract The contract may be cheaper to trade, the 

specifications might be considered technically superior, the trading platform might offer 

better performance or functionality, or there might be benefits to be achieved from 

clearing at a (necessarily) different Designated Clearing Organization (since the 

competing contracts would not be fungible and would not be cleared at CME Clearing). 

The CME Group's proposed guidance would be prejudicial to such users, introducing 

unjust and inappropriate risks to their conduct of business in the competing contract. 

In conclusion, we believe that the CME Group's proposed guidance would substantially 

damage free competition and the overall stability of the US financial markets. If adopted, 

it would be severely damaging to the regulatory goals Congress articulated for the 

Commodity Exchange Act. Accordingly, we respectfully request that the Commission 

not include the CME Group's proposal in the Commission's final guidance on DCMs' 

rules for trading off the centralized market 

We appreciate the opportunity to provide this comment and request that this letter be 

included in the public comment file to the proposed amendments to Commission Rule 

1.38 and the proposed Guidance on Core Principal9. 

Thomas F. Callahan 

President & Chief Executive Officer 

NYSE Liffe, LLC 

cc: Acting Chairman Michael Dunn 

Commissioner Bart Chilton 

Commissioner Walter Lukken 

Commissioner Jill E. Sommers 

Ananda Radhakrishnan 

John Lawton 

Richard Shilts 

David Van Wagner