CFTC/SEC seek to expand their authority over foreign exchanges
Felix Shipkevich - October 16, 2009The CFTC and SEC recommended legislation that would expand their authority over foreign exchanges that offer access to U.S. investors.
“Under the SEC approach foreign exchanges wishing to engage in a securities business in the United States must comply with the registration requirements under Section 5 of the Securities Exchange Act before operating in the United States. The CFTC, however, when its staff makes certain findings in a request for no-action relief, permits FBOTs, subject to appropriate conditions, to provide their
members or participants in the United States with access to their electronic trading systems without seeking designation under the CEA. As a result of concerns regarding the CFTC’s oversight capabilities over FBOTs that provide access to persons in the United States, legislation proposed by the Treasury Department contains provisions permitting the CFTC to require a statutory registration category for such entities. With regard to intermediaries, foreign broker-dealers’ interaction with United States investors in securities transactions is facilitated primarily through the exemptions from United States broker-dealer registration offered by Securities Exchange Act Rule 15a-6. Foreign broker-dealers relying on such an exemption must comply with the conditions of the exemption and limit their activities to those permitted under Rule 15a-6.The CFTC’s regulatory regime allows for broader cross-border intermediary access. Under Part 30 of the CFTC’s regulations, the CFTC may grant an exemption from registration to any foreign broker offering or selling foreign futures or options based upon substituted compliance with a comparable regulatory program”.
