Statement by Leo Melamed Pertaining to the
Treasury Department’s Blueprint on Regulatory Reform

March 31, 2008

I commend the Department of Treasury for its comprehensive examination of the American financial services sector. Many of its recommendations are prudent and welcome. However, I join others who strongly object to the recommendation to merge the CFTC and the SEC. While, the modernized principles-based regulatory philosophy at the CFTC is an outstanding model for the SEC to adopt, merger of the two agencies would jeopardize many of the necessary differences between futures markets and securities. These differences are fundamental and include the purpose and measure of margin and performance bond, protection of customer funds against broker defaults, price discovery in contrast to price preservation, customer suitability versus know your customer, markets and securities involving margin, mark to the market procedures, and a host of other basic distinctions.

Indeed, recent market upheavals offer solid testimony to the strength of the futures market's model. Throughout the turmoil, the performance of CFTC regulated futures exchanges stand in welcome contrast to the OTC markets. Self regulation under the CFTC's principles-based regulatory regime coupled with a strong central counter party clearing system that marks open positions to a legitimate market price twice a day works. In fact it anticipates and exemplifies the call for greater transparency in the OTC Markets. This commendable record deserves recognition not reform.

Leo Melamed
Chairman Emeritus, CME Group
March 31, 2008

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