NYSE EURONEXT LOBBIES FOR HARMONIZATION OF SEC, CFTC RULES

Posted September 2, 2009

WASHINGTON, D.C. – In considering how to harmonize regulatory efforts, the US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) should reach agreement on overarching principles, says Larry Leibowitz, Group Executive Vice President and Head of US Execution and Global Technology at NYSE Euronext, who testified today on the exchange’s regulatory views at a joint meeting of the two bodies.

Leibowitz also advanced several other points in his testimony, including recommendations that:

• The SEC should adopt a rule and product certification regime similar to that of the CFTC, or amend this regime to increase its predictability, fairness and flexibility.

• Both commissions should adopt a more uniform customer account and bankruptcy regime to protect customer assets, uphold the integrity of the clearing system, and provide market participants with risk-based portfolio margining.

• Both commissions should build on last year’s Memorandum of Understanding (MOU) for Novel Derivatives Products to develop a more robust and predictable process for approving products that have attributes of both securities and futures.

• The agencies should work to develop a coordinated “mutual recognition” approach to global regulation allowing cross-border markets to exist, subject to high global regulatory standards.

Concerning overarching principles and harmonization of the SEC and CFTC, Leibowitz urges a balance between principles-based and rules-based regimes that would be consistent with International Organization for Securities Commission (IOSCO) principles for securities regulation and screen-based trading to ensure a more consistent alignment of regulation across global markets.

“With the goal of informing and safeguarding investors from wrongdoing and upholding the integrity of the marketplace, these principles should encompass the fundamental tenets of effective regulation, including that regulation be judiciously administered based on risk and function, rather than legal structure; that regulation promote open, fair and transparent markets; and that regulation seek to promote fair and reasonable competition that is consistent with protecting the public,” he says.