Addendum to CFTC- SEC Memorandum of Understanding Regarding 

Coordination in Areas of Common Regulatory Interest: 

Principles Governing the Review o(Novel Derivative Products 

The CFTC and the SEC have agreed to discuss and coordinate regulatory action regarding novel 

derivative products pursuant to the Memorandum of Understanding Regarding Coordination in 

Areas of Common Regulatory Interest. The SEC and the CFTC acknowledge that there may be 

instances in which novel derivative products may reflect elements of both securities and 

commodity futures or options, and may impact the regulatory mission of each agency. The 

agencies recognize the inherent benefits of U.S. government agencies closely cooperating in 

areas that implicate overlapping areas of regulatory concern. 

Accordingly, pursuant to Article IV of the MOU, the agencies have agreed that designated 

agency staff will meet at least quarterly each year to identify and discuss regulatory issues 

related to novel derivative products. In order to further facilitate the resolution of shared 

regulatory issues involving novel derivative products, the agencies hereby agree that, consistent 

with their respective laws and regulations, consideration of issues related to such novel 

derivative products will be guided by the following principles: 

I. Recognition of Mutual Regulatory Interests. The agencies agree that while each 

agency has certain unique regulatory concerns, they share many areas of regulatory 

interests. Among the areas of shared regulatory interests are protecting investors and 

market participants, deterring fraud and manipulation, protecting the financial integrity of 

markets, and promoting competition, market efficiency, and price discovery. Each 

agency agrees that such shared regulatory interests will be recognized and considered 

when issues and requests relating to novel derivative products arise. 

2. Encourage Innovation. Both agencies shall endeavor to encourage the development and 

growth of novel derivative products, as such products can enhance innovation, efficiency, 

capital formation, and the investment and risk management choices available to the 

marketplace. 

3. Encourage Competition. Both agencies shall endeavor to promote competition among 

and between securities, futures, and options markets and market participants, as such 

competition can expand the range of products available to the marketplace while 

lowering transaction costs and encouraging market depth and liquidity. 

4. Market Neutrality. Each agency shall endeavor, for products that implicate areas of 

overlapping regulatory concern, to permit such products to trade in either or both an 

SEC- or CFTC-regulated environment, in a manner consistent with their respective laws 

and regulations. 

5. Legal Certainty. Both agencies shall endeavor to make appropriate use of all available 

authority, including exemptive and interpretive authority, with a view to increasing legal 

certainty for market participants and encouraging competing or complementary products 

to be brought to market expeditiously. 

6. Predictable and Efficient Consideration of Requests. Both agencies shall endeavor to 

consider and act upon requests relating to novel derivative products in a timely manner 

and to coordinate with one another concerning related requests. 
7. Information Sharing. The agencies agree to establish additional appropriate 

information-sharing arrangements, as necessary, to facilitate each other's requests for 

information regarding novel derivative products, consistent with the provisions of the 

MOU. 

This addendum is subject to all the terms and conditions of the MOU. 

Agreed to this _ll_ day of !flatJ 

Christopher Cox 

Chairman 

Securities and Exchange Commission 

_, 2008. 

Walter L. Lukken 

Acting Chairman 

Commodity Futures Trading Commission