Designated Contract Market Regulation - Comment Letter - CME Group - February 22, 2011

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Dodd-Frank Timeline, Core Principles and Other Requirements for Designated Contract Markets
Final Rule Issue Effective Date Compliance Date
June 19, 2012 August 20, 2012 October 17, 2012

Core Principles and Other Requirements for Designated Contract Markets
February 22, 2011

CME Group strongly disagreed with several provisions in the rule including:

  • "Its proposed rule under Core Principle 9 for DCMs – Execution of Transactions, which states that a DCM ―shall provide a competitive, open and efficient market and mechanism for executing transactions that protects the price discovery process of trading in the centralized market."
  • "The 85% centralized market trading requirement is completely arbitrary. The Commission justifies the requirement only with its observations as to percentages of various contracts traded on various exchanges it provides no support for a position that the 85% Requirement provides or is necessary to provide a ―competitive, open, and efficient market and mechanism for executing transactions that protects the price discovery process of trading in the centralized market of the board of trade."
  • "Further, imposition of the proposed 85% exchange trading requirement will have extremely negative effects on the industry. The 85% requirement will significantly deter the development of new products by existing exchanges like CME Group, and likewise deter any new futures exchanges from being established."
  • "Given the scope and highly prescriptive nature of the proposed new regulations and their impact on existing DCMs, CME Group believes that 60 days is a patently unreasonable timeframe in which to expect that DCMs will have implemented the necessary strategic, operational, system and rule changes that would be required in order for such a certification to be made to the Commission - assuming such certification could be made at all given the sweeping and absolute language contained in certain of the new prescriptive regulations."
  • "These proposed rules greatly and unnecessarily increase the documentation burden associated with this submission process, and it seems inevitable that they will greatly slow the process of new rule and product introduction."



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