The US financial regulators, the Commodity Futures Trading Commission and the Securities and Exchange Commission have announced that each has approved the trading and clearing of two novel
The US financial regulators, the Commodity Futures Trading Commission and the Securities and Exchange Commission have announced that each has approved the trading and clearing of two novel derivative products, futures and options respectively based on shares of the exchange-traded fund SPDR Gold Trust.
The CFTC’s and SEC’s approval leave it to market forces to determine the viability of the products and are designed to ensure that appropriate public, market participant, and financial protections are in place. The regulators expect the co-ordinated product approvals to enhance legal and regulatory certainty for users of the new products.
Futures contracts on the Gold Trust’s shares will trade on the OneChicago security futures exchange, while options will be listed on the American Stock Exchange, Chicago Board Options Exchange, International Securities Exchange, Philadelphia Stock Exchange and NYSE Arca. The Options Clearing Corporation will clear both types of contracts.
‘The actions announced today represent a major victory for the cause of financial innovation and will help promote competition among America’s financial markets,’ says CFTC acting chairman Walter Lukken.
‘With these actions, the CFTC and the SEC have begun a new era of co-operation, guided by the interagency agreement signed in March this year. I believe that America’s markets and market participants can only benefit from such close co-operation between government regulators.’
Adds SEC chairman Christopher Cox: ‘Today’s approvals offer America’s investors in gold an alternative that may, for many, be a more convenient and cost-effective way to manage their risks.
‘Today’s approvals also represent a significant step forward for the SEC and the CFTC in our inter-agency co-operation. America’s investors deserve a clear and united voice from government regulators on how these products will be treated under the law. Today’s co-ordinated product approvals provide that clarity and consistency.’
To address growing areas of mutual interest, the CFTC and SEC entered into a memorandum of understanding on March 11 that established a permanent regulatory liaison between the agencies. It provides for enhanced information-sharing and articulates various principles that should guide the agencies’ review of novel derivative products containing elements of both securities and commodity futures or options.
In accordance with these principles, the agencies have recognised their mutual regulatory interests and have agreed to encourage innovation, competition, market neutrality, and legal certainty. The approval for the trading of futures and option contracts on SPDR Gold Trust shares represent the first product approvals under the memorandum of understanding.