Washington, 16 September 2010

Exchanges and commodity brokers embrace the need to modernize the collection of trading data, but were in lock-step that a proposal by the U.S. futures regulator might go too far and make the process less efficient.

Industry officials said the Commodity Futures Trading Commission proposal to collect more data about the ownership of futures trading accounts risks being too onerous, expensive, and may require information hard to acquire or that is not universal among all firms.

"We should come to the table and discuss how to make this proposal work and do it in a way that is good for the market, that is good for transparency, but yet does not impose an undue burden on participants or our firms," Jim Moran, a director of market regulation and strategy for the CME Group Inc. Group Inc, told a CFTC roundtable.

The CFTC called a roundtable of industry officials to discuss its "ownership and control report" as the agency grapples with markets dominated by electronic trade and as it prepares to take regulatory oversight of over-the-counter derivative markets.

The new data, including trading account numbers, birth date and the names and addresses of account owners, will help the agency do a better job detecting and investigating attempted market manipulation, the CFTC has said. It also will help determine how large traders establish positions.

"The unprecedented ... shift in the style of trading from pit trading to electronic trading has necessitated many changes in the manner in which we regulate our markets," said Joseph Ott, a vice president of compliance with the Kansas City Board of Trade.

But roundtable participants cautioned the CFTC against moving too fast, and said that any proposal should allow them more than a year to put in place. They also warned against requiring each contract market to report the information for each active account, which would result in duplication since the same account may trade in similar commodities across multiple exchanges.

"Agreeing to this new approach will require fundamental rearchitecture of user setups across the industry, something that can take several years to accomplish and at a great cost," said Leslie Sutphen, an industry consultant, who proposed allowing more than 18 months to implement the plan.

A working group with the Futures Industry Association, which represents futures dealers, investors and exchanges, polled 13 futures commission merchants who estimated an average cost to implement the CFTC's plan of $18 million per firm.

The current measure could be expecially costly and burdensome for smaller firms. Panelists also argued requiring small traders to have to report information could clutter up the process and make things less efficient.

Ends --

 By Christopher Doering, Reuters - for Commodities Now.