NYMEX has long been a champion of vigorous competition and of greater globalization of services and products. We also have been supportive of and continue to support the CFTC’s staff no-action process, which exempts under certain conditions foreign boards of trade providing electronic access to US participants from the requirement to be registered with and regulated by the CFTC as a contract market.

But we also recognize that circumstances have changed considerably since the no action process first began nearly a decade ago. There have been substantial advances in technology since the former era of closed end proprietary trading systems. New exchanges have emerged that operate on a solely electronic basis, and products have now been listed under the no-action process that are parallel to and compete with other products listed by existing US exchanges that are subject to full CFTC regulation. So we believe that the current review being undertaken by the CFTC is timely and appropriate, and we commend the Commission for its willingness to confront these difficult topics squarely.

NYMEX is particularly concerned about the apparent lack of regulatory parity in the areas of large trader reporting and position limits. We believe that a level playing field is crucially important in order to ensure open and fair competition between the NYMEX and the FSA-regulated ICE Futures Exchange. More specifically, if the CFTC believes that the absence of position limits on WTI Crude futures contracts trading on ICE Futures is not a risk to market integrity, we question the need for such limits on the identical contracts trading on NYMEX.

NYMEX believes that the Commission faces several possible approaches in determining how best to carry out its regulatory mission in this new environment.
Regardless of how the Commission determines to proceed, it is vitally important to underscore the need to ensure that the Commission’s regulatory decisions facilitate a “level playing field” among competing markets. The promotion of “fair competition” is now codified in the law (that the CFTC is charged with applying and enforcing) as one of the key purposes of that statute. (emphasis added.)

Moreover, both Congress and the CFTC itself have repeatedly emphasized in recent years the need for the CFTC to ensure “fair competition” and “even-handed regulation.” Accordingly, we continue to believe that it is vitally important that the Commission provide US exchanges subject to its jurisdiction with the same flexibility accorded to foreign boards of trade (who are operating in the US on the basis of CFTC staff no-action letters premised upon such exchanges being subject to comparable regulation abroad).

We believe that a commitment to such regulatory consistency is an inherent requirement for just and equitable treatment, regulatory fairness and substantive due process under the law. We also continue to believe that the absence of such an approach could well result in a distortion of market efficiency when customers make choices among the same or similar products on the basis of differences in regulatory treatment among providers rather than on the basis of intrinsic distinctions in the products themselves or in related services.