This week’s decision by the US Commodity Futures Trading Commission – to reaffirm a policy of allowing certain regulated foreign futures exchanges to provide electronic trading access to appropriate US customers without duplicative US exchange registration – is a victory for all derivatives markets. It provides other regulators with a blueprint for how borderless exchange regulation can be advanced without compromising public goals.
While business headlines this year focused on the proposed New York Stock Exchange and Euronext merger, there was another important cross-border development in the futures markets. The electronic ICE Futures exchange – based in London and regulated by Britain’s Financial Services Authority – began trading a light crude oil futures contract citing a 1999 CFTC “no action” letter that permits US customers to trade this product electronically. This move was a direct challenge to the US registered New York Mercantile Exchange’s pit-traded crude benchmark. Competition has been fierce, with ICE capturing more than 30 per cent of market share.
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