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Commodity Futures Modernization Act of 2000 heralds new era for U.S. futures industry

When did the new millennium actually begin? Some say January 1, 2000, while others claim January 1, 2001, is the correct date. Although there is a difference of opinion concerning that date, I can state with certainty that a new era for the futures industry began on December 21, 2000. That's the day President Clinton signed the Commodity Futures Modernization Act of 2000. This groundbreaking legislation amends the Commodity Exchange Act (its first substantive revision in over 20 years) and modernizes the existing regulatory framework for most exchange-traded and over-the-counter (OTC) derivatives.

The legislation is the culmination of years of work by congressional leaders, their staff, government regulators and representatives of the various constituencies in the futures, securities and banking industries. If we were to compile the number of hours these individuals spent analyzing data, conducting meetings, debating the issues and negotiating compromises, I think we would all have a deeper appreciation for the magnitude of this achievement.

And the magnitude of this achievement should not be understated. The Commodity Futures Modernization Act of 2000 creates different categories of exchanges with different regulatory requirements. It authorizes futures trading on single stocks and narrow-based stock indices. It provides legal certainty for swaps and hybrid instruments. It closes a regulatory gap by giving the Commodity Futures Trading Commission (CFTC) limited jurisdiction over retail OTC foreign currency transactions. In short, it signals a new era for the U.S. futures industry.

Now that the legislation has been passed, there is much work to be done. Because NFA will regulate the securities side of business for single stock futures for our Members who trade them, we must apply to the Securities and Exchange Commission (SEC) to become a limited purpose national securities association (NSA). There are several requirements we must meet, including adopting a suitability rule for security futures comparable to that in the securities industry and adopting a rule requiring all Members and Associates to comply with the securities laws in connection with security futures transactions. We have already begun the work necessary to meet the SEC's requirements.

Congress has also requested a report within one year regarding the development of core principles for intermediaries. We will soon begin preparing an analysis of what combination of core principles, CFTC Regulations and NFA Rules would be most effective in this new regulatory environment.

As I stated earlier, the Commodity Futures Modernization Act of 2000 ushers in a new era for the futures industry. It's an era that will provide NFA with exciting new challenges and opportunities. It's an era we are eager to begin.

NFA is the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the derivatives markets.
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