CFTC Proposes to Allow FBOTs to Provide Direct Trading Access to U.S. Introducing Brokers
The CFTC proposed amendments to allow foreign trade boards ("FBOTs") to offer direct trading access to U.S.-based introducing broker participants and to establish a process for FBOTs to request revocation of their registration.
The CFTC proposed to amend CFTC Rules Part 48 ("Registration of Foreign Boards of Trade") to permit a CFTC-registered FBOT to provide direct access to its electronic trading and order matching system for a CFTC-registered introducing broker participant located in the United States for submission of customer orders to the FBOT’s trading system for execution. In addition, the CFTC proposed to establish a procedure for an FBOT to request revocation of its registration and to remove certain outdated references to no-action relief.
Comments are due by April 22, 2024.
Commentary
The CFTC proposal marks an important step in expanding access to non-U.S. derivatives exchanges to U.S. market participants.
Currently, FBOTs are permitted to grant direct trading access to U.S. FCMs, CPOs and CTAs to place orders for their customers (or for commodity pools, in the case of CPOs). However, FBOTs are not currently permitted to grant direct trading access to U.S. IBs. The proposal would fill this gap by permitting FBOTs to grant direct trading access to U.S. IBs to submit orders on behalf of their customers. As is currently the case with U.S. CPOs and CTAs, the proposal would require all trades of U.S. customers effected by a U.S. IB on an FBOT to be cleared and guaranteed by a CFTC-registered FCM, or a non-U.S. FCM exempt from registration pursuant to CFTC Rule 30.10 ("Petitions for exemption").