COMMODITY FUTURES TRADING COMMISSION 

2033 K STREET, N.W., WASHINGTON, D.C. 20581 

(202) 254-8955 

{202) 254-3534 FACSIMILE 

DIVISION OF 

TRADING AND MARKETS 

October 9> 1991 

Re: 

Dear 

This is in response to your letter. dated June 18, 1991, to 

Andrea M. Corcoran, Director, Division of Trading and Markets. (the 

"Division"), Conunodity Futures Trading Conunission (the "Commission"), as supplemented by telephone conversations with Division 

staff. By your letter, you request, on behalf of 

Services Inc. , that the staff not recommend any 

enforcement action to the Commission if operates 

, its proposed computerized system for trading foreign 

currencies and the U.S. dollar for actual delivery, without seeking 

designation as a contract market o~ftherwise complying with the 

Commodity Exchange Act (the "Act").-

Based upon the representations made in your letter, we 

understand that the facts are as follows. is a subsidiary 

of , a corporation incorporated with 

limited liability under the laws of and 

supplies the international business community and news media with 

a wide range of products, including real-time financial data, 

transaction systems, access to numeric and textual historical 

databases, news and news pictures. The information that is 

supplied is obtained from various exchanges, over-the-counter 

markets, subscribers and from a network of journalists, photographers and cameramen. distributes information through approximately 205,000 video terminals and teleprinters. It also has a 

controlling interest in , an international television news 

agency, and its group companies design and install trading room 

systems. 

You represent that (or one or more of 's other 

subsidiaries) intends to operate (also referred to 

as the "System"). _ will be a computerized communications system for·international trading of foreign currencies and 

the u.s. dollar for actual delivery. It is designed to facilitate 

so-called '.'spot" foreign currency trading transactions. In a spot 

11 1 7 U.S.C. § 1 et ~· ( 988). 
Page 2 

transaction, each trading party agrees to pay a certain amount of 

a specified currency to the other on an agreed-upon date which, 

consistent with cash market practice, is typically two business 

days after the transaction is originated. is 

intended to serve as an alternative to the "brokers market," a 

mechanism now in use for matching currency trading partners. As 

currently proposed, all subscribers to the System will be U.S. or 

foreign commercial banks. 

Your letter describes as a system that will 

serve as a "name passer" in spot transactions between commercial 

banks involving the actual transfer of funds. Subscribers will 

input bids and offers to the System by computer. These prices will 

be displayed on each subscriber's terminal. 

will automatically "match" buy and sell order a I between 

subscribers who have mutually acceptable credit limits.~ After 

a match occurs, the System will automatically display on each 

counterparty's terminal screen the other's pre-programmed settlement instructions, and the System will generate a hard-copy 

confirmation of the transaction. 

You further represent that will not serve as a 

"clearing organization" for You base this 

representation upon the facts that, among others: (1) will 

not offer subscribers a means to liquidate performance obligations 

through offset; rather, performance obligations entered into over 

the _ System will be terminable only with counterparty 

consent (which need not be communicated through ); 

(2) will not be involved in the process of transferring 

currency between principals, either in trades or in any other 

aspect of the settlement process, aside from enabling the exchange 

of pre-programmed settlement instructions which provide subscribers 

with information pertaining to bank names and accounts for purposes 

of facilitating the wiring of funds; and (3) will 

include safeguards intended.to alert counterparties to communications faults and allow such parties to sort out trades disrupted by 

such faults directly, without ' involvement. 

will, however, maintain a record of each transaction 

effected through , including the names of the 

participants, the date, the currencies and particular amounts 

involved, and taxpayer identification numbers. These records will 

be maintained on computer tape or other storage media for five 

years. Subscribers to the system will pay a monthly fee and a fee 

per trade. 

~/ Each subscriber will be able to determine and input to 

a credit limit for each other subscriber; 

will refer to these on-line credit limits in matching buy and sell 

orders. 
Page 3 

Based upon your representations, the staff will not recommend 

that the Commission take any enforcement action if operates _ in the manner described abov~, without seeking 

designation as a contract market or otherwise complying with the 

Act. This position is subject to the conditions that: ( 1) 

operation of _ is strictly limited to 

facilitating spot foreign currency transactions by matching buy and 

sell orders between its commercial bank subscribers; (2) 

does not offer a means to liquidate performance obligations entered 

into over the System through offset and such obligations will be 

terminable only through counterparty consent; and (3) does 

not involve itself in the process of transferring currency between 

principals aside from enabling the exchange of pre-programmed 

settlement instructions as described herein. 

The position we have taken herein is related solely to 

' operation of the System for spot transactions and not to 

any other activities of or the System, or otherwise, and is 

based upon the representations that you have made to us. Any 

different, changed or omitted facts or conditions might require us 

to reach a different conclusion. In this connection, we request 

that you notify us immediately in the event the activities of 

as they relate to the operation of change in 

any way from those as represented to us, including, of course, any 

changes resulting in the System being operated or 

used to facilitate transactions other than spot foreign currency 

trading transactions as described in your letter. It also should 

be noted that this position is that of the staff and is not binding 

upon the Commission. //~er trul:~~;s 1., ~ ,L __ Andrea M. Corcoran .,_. ... ·--. 

Co-Chairmen 

Task Force on Off-Exchange 

Instruments