The US derivatives regulator is launching a review of foreign trading platforms that let US-based individuals directly access their electronic trading systems, according to an agency official familiar with the matter.
The Commodity Futures Trading Commission is examining foreign boards of trade to ensure they are properly managing risks, according to the official who asked to speak anonymously to discuss internal matters.
About two dozen foreign platforms have a so-called FBOT designation, which means their home country’s regulator has an information-sharing arrangement with the agency and their rules are considered comparable with the CFTC.
That label allows the exchange to provide direct access to US traders without separately applying for a US license. The exchanges must enforce rules to maintain market and financial integrity.
Some CFTC officials have expressed concerns about oversight of foreign boards of trade and those that have larger participation from US traders, the official said.
The regulator plans to meet with exchange leaders and clearinghouses as part of its evaluation, which the official said would be the first formal review since the framework was established after the 2008 financial crisis.
The review is not focused on any specific exchange but may result in the CFTC asking some foreign exchanges to register with the US regulator, they said.
Firms with the designation include the almost 150-year-old London Metal Exchange and the Tokyo Commodity Exchange. The most recent entrant is the Singapore-based Abaxx Exchange Pte. Ltd., which got the CFTC’s blessing in November.
The agency has revoked the designation from a handful of exchanges over the past decade at their request because the exchanges, including ICE Futures Canada Inc. and CME Europe Limited, closed, agency records show.
The landmark Dodd-Frank Act led to the regulator establishing the system to register foreign boards of trade.
