CFTC Staff Letter 00-80: No-Action Relief for Electronic Commodities Trading Platform

00-80
CFTC Letter No. 00-80
June 30, 2000
No-Action
Division of Trading & Markets
Re: Electronic Commodities Trading Platform
Dear :
This is in response to your letter dated June 5, 2000 to the Division of Trading & Markets and the Division of Economic Analysis of the Commodity Futures Trading Commission (the "Commission"), on behalf of your client, "X", as supplemented by additional correspondence, meetings and telephone conversations. In your letter of June 5, 2000 you seek confirmation that the Division of Trading & Markets and the Division of Economic Analysis will not recommend that the Commission take enforcement action under the Commodity Exchange Act, 7 U.S.C. § 1 et seq. (the "Act"), or the regulations thereunder, in connection with (i) the operation by "X" of a proposed electronic platform (the "Platform") for the trading of physical commodities and derivatives products, (ii) any transactions executed through the Platform, or (iii) any participants in such transactions. In accordance with our discussions, the Division of Trading & Markets (the "Division") is responding to your request. Facts Based upon the representations made by and on behalf of "X" in written correspondence, meetings and telephone conversations with Commission staff, we understand the facts to be as follows:
"X" is a Delaware limited liability company. You have represented that none of the persons who are 10%-or-more interest holders, members of the Board of Managers or senior officers of "X" is subject to any of the statutory disqualifications from registration listed in Sections 8a(2) or 8a(3) of the Act, 7 U.S.C. §§ 12a(2) and 12a(3).1 You have further represented that "X" will impose and enforce requirements that its board members and senior executives satisfy specified fitness criteria, including that such persons are not subject to any statutory disqualifications under Sections 8a(2) or 8a(3) of the Act.You have provided a written representation to the effect that "X" will endeavor to prevent, and will by its policies prohibit, any director, officer, employee or agent who may, in the performance of his or her duties, gain access to material nonpublic information regarding the users of, bids and offers made on, or transactions executed through the Platform, from (i) trading for such person's own account or on behalf of any other account in commodities, commodity futures contracts, options on commodity futures contracts or other commodity derivatives, on the basis of such material nonpublic information, and (ii) disclosing for any purpose inconsistent with the performance of such person's official duties any such material nonpublic information. In relation to this, you have further represented that "X" will endeavor to provide access to material nonpublic information only to such of its directors, officers, employees and agents who require such access in the performance of their duties. "X" is in the process of developing the Platform for the purpose of trading physical commodities and derivative products. It intends that the Platform initially will offer trading in physical and derivative products relating to the following energy commodities: crude oil, heating oil, unleaded gasoline and jet kerosene. Later, the product offerings of the Platform may be expanded to include other commodities.2 Among the derivative products to be traded through the Platform will be file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/00letters/tm00-80.htm (1 of 5) [5/6/2010 6:22:17 PM]