Commodity Futures Trading Commission

Global Markets Advisory Committee

Foreign Boards of Trade and the 

Dodd-Frank Bill

Presentation by Duane Andresen 

Foreign Boards of Trade Registration 

Rulemaking Team

October 5, 2010

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Disclaimer

The opinions expressed in this presentation do 

not represent the official views of the 

Commission, its staff, or even, necessarily, 

myself

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Overview of the Dodd-Frank Bill

Provisions Relating to FBOTs

• Provides that the Commission may require 

registration for a foreign board of trade (FBOT) 

that provides its members or other 

participants located in the United States with 

direct access to the FBOT’s electronic trading 

and order matching system

• The CFTC would adopt rules and regulations 

prescribing procedures and requirements 

applicable to the registration

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Overview of Dodd-Frank Bill

Provisions Relating to FBOTs

• The registration requirement will replace the 

current practice of issuing staff no-action relief 

letters 

• In adopting rules and regulations, the 

Commission shall consider:

o whether any such FBOT is subject to comparable, 

comprehensive supervision and regulation by the 

appropriate governmental authorities in the 

FBOT’s home country

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Overview of Dodd-Frank Bill

Provisions Relating to FBOTs

• In reviewing an application for registration, 

the Commission would probably consider:

o Membership criteria

o Trading system

o Terms and conditions of contracts

o Settlement and clearing

o The regulatory regime

o Rule enforcement

o Information sharing

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Overview of Dodd-Frank Bill

Special Provisions for Linked Contracts

• With respect to a contract that settles against any 

price of 1 or more contracts listed for trading on a 

US-registered entity, the FBOT must:

o Daily Trading Information: make public daily trading 

information on the linked contract that is comparable 

to the daily trading information published by the 

registered entity for the contract against which the 

linked contract settles

o Position Limits: adopt position limits for the linked 

contract that are comparable to the position limits 

adopted by the registered entity for the contract 

against which the linked contract settles

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Overview of Dodd-Frank Bill

Special Provisions for Linked Contracts

o Position Adjustments: can require market participants to limit, 

reduce, or liquidate any position determined to be necessary to 

prevent or reduce the threat of price manipulation, excessive 

speculation, price distortion, or disruption of delivery or the 

cash settlement process

o Large Trader Positions: provide information to the Commission 

regarding large trader positions in the linked contract that is 

comparable to the large trader position information collected by 

the Commission for the contract against which the linked 

contract settles

o Aggregate Trader Positions: provide the Commission such 

information as is necessary to publish reports on aggregate 

trader positions for the linked contract that are comparable to 

such reports on aggregate trader positions for the contract 

against which the linked contract settles 

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Provisions Relating to FBOTs

• Considerations - 1

o The registration requirement will replace the current practice of 

issuing staff no-action relief letters.

o To what extent should any registration submission requirements match no- action requirements?

o Should registration be viewed as a codification of the current no-action policy?

o What standard should the Commission use to determine if an FBOT 

should be eligible for registration? the 2006 Policy Statement criteria: 

o possess the attributes of established, organized exchanges, 

o adhere to appropriate rules prohibiting abusive trading practices,

o have been authorized by a regulatory process that examines customer and 

market protections and 

o are subject to continued oversight by a regulator that has power to intervene 

in the market and share information with the Commission

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Provisions Relating to FBOTs

• Considerations - 2

o What should constitute comparable, 

comprehensive supervision and regulation by 

appropriate government authorities in the FBOT’s 

home country?

o How should registration requirements affect 

FBOTs that currently have no-action relief? 

oGrandfathered

o Limited registration application

o Treated like a new applicant

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Provisions Relating to FBOTs

• Considerations - 3

o The Dodd-Frank Bill defines direct access, for purposes 

of FBOT registration, to refer to an explicit grant of 

authority by an FBOT to an identified member or 

other participant located in the U.S. to enter trades 

directly into the trade matching system of the FBOT

o Should this definition be expanded for registration 

purposes to include other order routing 

methodologies?

o Automated order routing through a firm’s risk management 

filter

o Sponsored access

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Proposed FBOT Registration Rules

• Proposed FBOT Registration rules will be 

published in the Federal Register before the 

end of the year

• We welcome comments on any area of the 

proposed rule

• The FBOT registration rulemaking is on a one-year 

timeframe

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Accessing the FBOT Web Page

• To submit preliminary comments now (before proposed rules 

are published), send emails to FBOTRegistration@cftc.gov.

• The link to the CFTC’s FBOT web page is: 

http://www.cftc.gov/LawRegulation/DoddFrankAct/OTC_14_F

BOTRegistration.html

• Alternatively, you can get there by:

o Go to the CFTC website, www.cftc.gov

o Go to the drop down menu under “Law and Regulation”

o Click on “Dodd-Frank Act”

o Under “Rule Writing Process,” click on “See List of Rulemakings”

o Scroll down the list and click on item XIV, “New Registration 

Requirements for Foreign Boards of Trade”

o The comment email address is FBOTRegistration@cftc.gov

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