CFTC Adopts Rule to Allow FBOTs to Provide Direct Trading Access to US IBs
Commentary by Mark Highman
The CFTC adopted amendments to allow foreign trade boards ("FBOTs") to offer direct trading access to US-based introducing broker participants. (See related coverage.)
The CFTC amended 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. In addition, the CFTC established a procedure for an FBOT to request revocation of its registration and to remove certain outdated references to no-action relief.
The final rules are effective 30 days from the date of publication in the Federal Register.
In a statement, CFTC Commissioner Caroline D. Pham supported the final rule because it "promotes access to markets for U.S. participants, competition, and liquidity." She further said that the final rule "will provide more choice in brokers and broker arrangements for U.S. market participants that trade foreign futures and ensure that appropriate customer protections are in place."
Commentary
This CFTC rule is an important step in expanding access to non-US derivatives exchanges to US market participants. As noted in the rule proposal, FBOTs are currently permitted to grant direct trading access to US FCMs, CPOs and CTAs to place orders for their customers (or for commodity pools, in the case of CPOs). However, FBOTs have not previously been permitted to grant direct trading access to US IBs. This rule fills this gap by permitting FBOTs to grant direct trading access to US IBs to submit orders on behalf of their customers.