CFTC issues impartial access interpretation for U.S. derivatives markets

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CFTC impartial access for derivatives

Highlights

CFTC published an interpretation of Regulation 38.151(b) requiring designated contract markets to ensure impartial, open, and competitive access for all members.
Exchanges must end U.S. geographic restrictions and ensure intermediaries comply within 30 days or report to the Division of Market Oversight if not feasible.
New interpretation raises regulatory scrutiny on domestic access limitations, with enforcement to be considered case-by-case, affecting exchanges and connected intermediaries.

30-day compliance timetable for exchanges

As reported by Commodity Futures Trading Commission, the agency has issued an interpretation of Regulation 38.151(b), which requires designated contract markets to provide competitive, open, fair, and impartial access to members and persons with trading privileges.

CFTC Chairman Michael S. Selig says derivatives markets must operate on a uniform basis at a national scale to meet the purposes of the Commodity Exchange Act. He says geographic access restrictions are inconsistent with those purposes and with the Act's impartial access requirements.

Under the interpretation, designated contract markets must cease domestic geographic restrictions that violate the rule within 30 days, or submit an explanation to the Division of Market Oversight on why compliance is not feasible. Within the same 30-day period, exchanges should also ensure intermediaries accessing their markets are not impeding compliance with the impartial access requirements, or provide the Division with an explanation if that cannot be achieved.

Regulatory impact on market access standards

The move signals closer scrutiny of exchange access policies across the U.S. derivatives sector, particularly where membership or trading access may vary by location within the country. It also extends compliance expectations beyond exchanges themselves to intermediaries that connect participants to those markets.

The Commission says it will consider the facts and circumstances of any particular case in connection with potential action. That leaves room for case-by-case enforcement, while putting market operators on notice that domestic access limits face a higher regulatory bar.

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