U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre 

1155 21st Street, NW, Washington, DC 20581 

Telephone: (202) 418-5120 

Facsimile: (202) 418-5524

www.cftc.gov

Office of General Counsel

CFTC letter No. 07-03 

March 5, 2007 

No-Action 

Office of General Counsel 

 

Mr. Gilles Clerc 

Deputy Director, Market Operations 

Euronext.liffe 

Cannon Bridge House, 1 Cousin Lane 

London EC4R 3XX United Kingdom 

Facsimile: 44 (0) 20 7588 3624 

By Facsimile and U.S. Mail

Dear Mr. Clerc: 

 This letter is in response to your request dated February 13, 2007, on behalf of Euronext 

Paris SA (“Euronext Paris”). You seek confirmation from the Office of General Counsel 

(“Office”) of the U.S. Commodity Futures Trading Commission (“Commission” or “CFTC”) 

that the no-action relief granted by this Office to LIFFE Administration and Management 

(“LIFFE”) on January 22, 2004,1 to offer and sell in the United States LIFFE’s futures contracts 

based on the FTSEurofirst 80 Index (“FTSEurofirst 80”) and the FTSEurofirst 100 Index 

(“FTSEurofirst 100”) (collectively “Indices”), will be extended to futures contracts based on 

these Indices listed and traded on Euronext Paris. 

 We understand that LIFFE and Euronext Paris are part of the same group owned by 

Euronext NV. Both exchanges operate on the same trading platform, although the corresponding 

markets remain cleared by two separate clearing houses within the London Clearing House 

Group, i.e. LCH.Clearnet Ltd. and LCH.Clearnet SA. The exchanges are included in 

Euronext.liffe, which is the international derivatives markets division of the Euronext group. 

Within the framework of the Euronext group organization, the decision was made to remove the 

futures contracts on the Indices listed and traded on LIFFE, and to make futures contracts on the 

Indices available to be listed and traded on Euronext Paris--in effect to transfer the contracts.2

 

 

1

 CFTC Staff Letter No. 04-05 [2003-2004 Transfer Binder] Comm. Fut. L. Rep. (CCH) 

¶ 29,677 (Jan. 22, 2004). 

2

 You state that this decision was made in order to enhance the cross-margining possibilities with 

other correlated equity index futures contracts that are cleared by LCH.Clearnet SA, namely the 

CAC 40 Index and AEX Index futures contracts that are the subject of no-action relief for offer 

and sale in the U.S. 
2

This decision was implemented on December 1, 2006, when futures contracts on the Indices 

were admitted to list and trade on Euronext Paris, while futures contracts on the Indices listed 

and traded on LIFFE were withdrawn following the expiration of the last available maturity 

tradeable there.3

 

 

The terms and conditions of the Euronext Paris cash-settled futures contracts generally 

are identical to the terms and conditions of LIFFE’s futures contracts on the FTSEurofirst 80 and 

FTSEurofirst 100 that existed when this Office originally issued the no-action letter to LIFFE. 

The primary difference is the method for calculating the final settlement price. Previously, the 

final settlement price for each contract was calculated based on the levels of the relevant index 

observed every 15 seconds between 9:50 a.m. and 10:00 a.m. London Time (41 observations). 

The final settlement price was the average of those 41 Index levels. The amended final 

settlement price for each of the Euronext Paris contracts is based on the closing prices of the 

component stocks.4

 Both the FTSEurofirst 80 and FTSEurofirst 100 continue to be based on highly 

capitalized and actively traded securities currently listed on major European stock exchanges. 

Based on information supplied by Euronext.liffe, the Indices continue to be not narrow-based.5

 

In this regard, the FTSEurofirst 80 contains 79 stocks and the FTSEurofirst 100 contains 101 

stocks. The largest stock accounted for 4.65 percent and 3.92 percent, respectively, of the 

FTSEurofirst 80 and FTSEurofirst 100. The largest five stocks accounted for 16.67 percent and 

16.53 percent, respectively, of the FTSEurofirst 80 and FTSEurofirst 100. Finally, the lowest 

weighted 25 percent of each respective index had an average daily trading volume of about €4 

billion.6

 

 In evaluating requests for no-action relief from foreign boards of trade seeking to offer 

and sell in the U.S. foreign futures contracts based on foreign security indices, this Office has 

applied the three criteria enumerated in Section 2(a)(1)(C)(ii) of the Act when those foreign 

 

3 See letter from Gilles Clerc, Deputy Director, Market Operations, Euronext.liffe to Julian E. 

Hammar, Counsel, CFTC, dated February 13, 2007, at 1. 

4

 Id. at 2. 

5

 According to Section 1a(25)(A) of the Commodity Exchange Act (“CEA” or “Act”), 7 U.S.C. 

§ 1a(25), a security index is a narrow based security index if it meets any one of the following 

criteria: (1) it has nine or fewer component securities; (2) any one of its component securities 

comprises more than 30% of its weighting; (3) the five highest weighted component securities in 

the aggregate comprise more than 60% of the index’s weighting; or (4) the lowest weighted 

component securities comprising, in the aggregate, 25% of the index’s weighting, have an 

aggregate dollar value of average daily trading volume of less than $50 million (or in the case of 

an index with 15 or more component securities, $30 million). See also Section 3(a)(55)(B) of the 

Securities Exchange Act of 1934 (“Exchange Act”). Thus, an index that does not have any of 

these elements is not a narrow-based security index. 

6 See letter from Mr. Clerc to Mr. Hammar, dated February 13, 2007, at 1-2. 
3

boards of trade do not seek designation as a contract market or registration as a DTEF. Those 

three criteria are: (1) the contract must provide for cash settlement; (2) the contract must not be 

readily susceptible to manipulation nor to being used to manipulate any underlying security; and 

(3) the group or index of securities must not constitute a narrow-based security index.7

 In our considered view, the change in the method for calculating the final settlement price 

from the LIFFE futures contracts to the Euronext Paris futures contracts noted above does not 

make the Euronext Paris futures contracts readily susceptible to manipulation, nor to being used 

to manipulate any underlying security.8 In addition, an important consideration is the requesting 

exchange’s ability to access information regarding the securities underlying the index. Euronext 

Paris represents that it will have access to surveillance information regarding the constituent 

stocks of the FTSEurofirst 80 and FTSEurofirst 100, either directly or indirectly through the 

French regulator of Euronext Paris, the Autorité des Marchés Financiers (“AMF”).9

 Therefore, 

Euronext Paris should have access to information necessary to detect and deter manipulation. 

Finally, as noted above, the Indices are not narrow-based, and Euronext Paris’s futures contracts 

on the Indices are cash settled. Accordingly, the Indices and the futures contracts based thereon 

listed on Euronext Paris conform to the criteria set forth in CEA Section 2(a)(1)(C)(ii). 

 In light of the foregoing, this Office confirms that the no action relief previously granted 

to LIFFE concerning the offer and sale in the United States of its futures contracts based on the 

FTSEurofirst 80 and FTSEurofirst 100 will be extended to the futures contracts based on the 

Indices listed and traded on Euronext Paris. Because this letter is based upon the facts and 

representations contained in your February 13, 2007 letter, attachments thereto and supplemental 

 

7

 With regard to the third criterion, the CFTC and SEC jointly promulgated Rule 41.13 under the 

CEA and Rule 3a55-3 under the Exchange Act, governing security index futures contracts traded 

on foreign boards of trade. These rules provide that “[w]hen a contract of sale for future delivery 

on a security index is traded on or subject to the rules of a foreign board of trade, such index 

shall not be a narrow-based security index if it would not be a narrow-based security index if a 

futures contract on such index were traded on a designated contract market or registered 

derivatives transaction execution facility.” CFTC Rule 41.13, 17 C.F.R. § 41.13; Exchange Act 

Rule 3a55-3, 17 C.F.R. § 240.3a55-3.

8

 In this regard, the component stocks for each of the Indices are among the largest, in terms of 

market capitalization, and most liquid stocks listed for trading in Europe. Moreover, the close is 

one of the most active times of the trading day. 

9 See electronic mail from Giles Clerc, Deputy Director, Market Operations, Euronext.liffe to 

Julian E. Hammar, Counsel, CFTC, dated February 16, 2007. Specifically, Euronext Paris would 

be able to obtain information about trading in securities on the Euronext securities cash markets 

directly from those markets and, in relation to securities traded on other European markets, AMF 

would be able to obtain the relevant information via the Committee of European Securities 

Regulators’ Memorandum of Understanding, known as the FESCO MOU. Euronext Paris, as 

successor to the Parisbourse SBF SA, also is a signatory to the International Information Sharing 

Memorandum of Understanding and Agreement signed on March 15, 1996, at Boca Raton, 

Florida. 
4

electronic mail, as well as those facts and representations contained in the original request for noaction relief for the futures contracts based on the Indices made by LIFFE, it should be noted that 

any different, omitted or changed facts or conditions might require a different conclusion. This 

position also is contingent on the continued compliance by Euronext Paris with all regulatory 

requirements imposed by the AMF, and the applicable laws and regulations of France. In 

addition, this position may be affected by any rules that the Commission may adopt regarding 

futures contracts based on non-narrow-based security indices. 

 We note that in the event that Euronext Paris is unable to obtain access to adequate 

surveillance data, or is unable to share such data with the CFTC, this Office reserves the right to 

reconsider the position we have taken herein. With respect to its ability to share surveillance 

information with the CFTC, Euronext Paris represents that it is willing and able to share 

information in relation to its futures contracts on the Indices under the terms and conditions 

defined in the foreign terminal no-action letter granted to Euronext Paris by CFTC staff in 

1999.10 Under that arrangement, information which is not confidential will be provided directly 

to the CFTC by Euronext Paris, whereas any confidential information would be provided to the 

CFTC via the Memorandum of Understanding dated June 6, 1990, between the CFTC and the 

Commission des Opérations de Bourse (“COB”), now the AMF.11

 Euronext Paris also has requested that, upon issuance of the confirmation of relief granted 

herein, it be permitted to make its futures contracts based on the Indices available for trading 

through its electronic terminals in the U.S. in accordance with the terms and conditions of the 

foreign terminal no-action letter dated August 10, 1999, issued by Commission staff to 

Parisbourse SBF SA, the predecessor to Euronext Paris.12 In this regard, Euronext Paris has 

certified that it is in compliance with the terms and conditions of the August 10, 1999 no-action 

letter and that the contracts on the Indices will be traded in accordance with the terms and 

conditions of the foreign terminal no-action letter. We have consulted with the Commission’s 

Division of Market Oversight (“Division”), which is the Division in the Commission that 

administers foreign terminal no-action letters. The Division has concluded that allowing 

Euronext Paris to make its futures contracts on the Indices available for trading pursuant to the 

August 10, 1999 no-action letter would not be contrary to the public interest. Accordingly, on 

behalf of the Division, this Office hereby confirms that the no-action relief granted to Euronext 

Paris in the August 10, 1999 letter extends to Euronext Paris’s futures contracts based on the 

Indices. 

 

10 See letter from Mr. Clerc to Mr. Hammar, dated February 13, 2007, at 2; CFTC Staff Letter 

No. 99-33 [1998-1999 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 27,746 (August 10, 1999). 

11 We note that AMF is a signatory to the Multilateral Memorandum of Understanding 

Concerning Consultation and Cooperation and the Exchange of Information of the International 

Organization of Securities Commissions (“IOSCO MOU”), to which the Commission also is a 

signatory. The AMF, as successor to the COB, is also a signatory to the to the Declaration on 

Cooperation and Supervision of International Futures Markets and Clearing Organizations, as 

amended, signed on March 15, 1996, at Boca Raton, Florida. 

12 See supra note 10, CFTC Staff Letter No. 99-33. 
5

 The offer and sale in the U.S. of Euronext Paris’s futures contracts on the Indices is, of 

course, subject to Part 30 of the Commission’s regulations, which governs the offer and sale of 

foreign futures and foreign option contracts in the U.S.13

 Sincerely, 

 Elizabeth L. Ritter 

 Deputy General Counsel 

 

 

 

13 See 17 C.F.R. Part 30.