The influential Washington-based Managed Funds Association has argued strongly for a speedy and favourable review by the CFTC of the application by Eurex for contract market designation in the US.
The MFA stated it "firmly supports the development of competitive markets and an expeditious, but thorough, review by the Commodity Futures Trading Commission (CFTC) of U.S. Futures Exchange, L.L.C.'s (Eurex US or USFE) application for designation as a contract market."
John G. Gaine, MFA President, said: "It is important that the voice of the end-users of futures markets contributes to this dialogue, and MFA hopes that this testimony accomplishes that goal."
He stressed: "MFA views price competition among futures exchanges as a direct boost to the bottom line of the futures investing public."
The MFA has submitted written testimony at close of business to the US House Committee on Agriculture. MFA, headquartered in Washington, DC, is the key trade association representing US professionals who specialize in alternative investment strategies including hedge funds, funds of funds and managed futures funds through effective advocacy and education. MFA's approximately 700 members manage a significant portion of the estimated USD 650 billion invested in these strategies.
MFA supports CFTC Chairman James Newsome, who stated in his testimony that the Commission has been "committed to providing a level regulatory playing field for all existing and potential market participants, while being vigilant in its mission to foster markets free of fraud and manipulation."
Gaine testified that "MFA and its Members favour the addition to the marketplace of any qualified contract market on the basis of fundamental principles of fairness and competition."
In his written testimony, Gaines stated: "MFA believes that the designation of additional futures exchanges will foster an environment of healthy business rivalry, resulting in technological innovation. The array of products domestically available to U.S. investors is expected to increase significantly with USFE's introduction of certain European equity index futures and euro-denominated interest-rate products currently accessible only on overseas exchanges. Additionally, the liquidity of contracts already accessible in the U.S. markets should be enhanced with USFE's expected inclusion of U.S. interest-rate contracts in its product array."
"Furthermore, we believe that the advent of USFE's involvement in the U.S. futures markets should promote the "responsible innovation and fair competition" among exchanges and market participants that the Commodity Futures Modernization Act of 2000 (the "Act") envisioned as critical objectives. MFA believes this involvement would serve the public interest in multiple dimensions by materially improving the liquidity, efficiency, and product diversification of the U.S. futures markets."
" In addition, MFA views price competition among futures exchanges as a direct boost to the bottom line of the futures investing public, and allows exactly the sort of vigorous interplay among market participants and exchanges that the Act was designed to encourage. We are confident that the CFTC will evaluate U.S. Futures Exchange's application with these concepts in mind."
"MFA believes these benefits to the investing public come at no cost from the standpoint of investor protection or the reliability of the operation of our nation's markets so long as the CFTC review concludes that adequate investor protection measures are in place. If approved by the CFTC, USFE will operate in Chicago and be completely subject to the jurisdiction of the CFTC and the full panoply of relevant U.S. law. USFE trades are to be settled at The Clearing Corporation, a highly credible domestic clearing organization with historical clearing relationships with the Chicago Board of Trade ("CBOT), while USFE's execution system is expected to be an updated version of the trading platform developed by USFE's parent, Eurex, and deployed from 2000 to the present by CBOT. Moreover, Eurex itself is a globally respected exchange-in fact, the largest futures exchange (by volume of contracts) in the world-already well known to the CFTC in the context of the CFTC's granting of various forms of regulatory relief. Many U.S. market participants are already active traders on Eurex."
He concluded: "As the principal representative of end-users of futures exchanges, MFA believes there is an overwhelming public policy argument to be made for the CFTC's expeditious review of the USFE's application for designation as a contract market."
Gaine said that the designation of additional futures exchanges will foster an environment of healthy business rivalry, resulting in technological innovation. He stated: "As the principal representative of end-users of futures exchanges, MFA believes there is an overwhelming public policy argument to be made for the CFTC's expeditious review of the USFE's application.... We believe that this will promote market efficiency and depth and avoid disadvantaging investors if the application process is delayed."
He added: "We are confident that the CFTC will fulfil its pledge to "review the application, mindful of all the comments received."
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