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Long but worth reading if you are interested in the direction of trading
instrucments, if not delete. Ira.
By Will Acworth, Bridge News
Washington--Mar 2--Despite pressure from
Congress, US securities and futures regulators
have failed to reach an agreement on how to
regulate futures on individual stocks. In a letter
sent to Congress Thursday, the regulators said
they were willing to share responsibility for
regulating these products, but said it will take
several more months to draft legislation.
* * *
The letter was sent to Senate Agriculture
Committee Chairman Richard Lugar, R-Ind., and
Senate Banking Committee Chairman Phil Gramm,
R-Texas. Those 2 lawmakers had asked the SEC
and CFTC last December to come up with a
regulatory framework proposal by Feb 21, and
are likely to be disappointed by the delay in
reaching an accord.
Single-stock futures are not permitted to trade
on US exchanges under current US laws, but
there is a growing consensus among regulators
and industry officials that the time has come to
lift this prohibition.
Lawmakers therefore asked the Securities and
Exchange Commission and the Commodity
Futures Trading Commission last year to suggest
a framework for regulating these products, with
the idea of incorporating this into legislation and
enacting it into law this year.
The letter, which was signed by SEC Chairman
Arthur Levitt and CFTC Chairman William Rainer,
said the 2 agencies have reached agreement on
several general principles that should guide the
regulation of single-stock futures. H owever, the
letter also gave a long list of " important issues"
that remain to be resolved.
For example, the 2 agencies agreed that the SEC
should "take the lead" in combating insider
trading involving single-stock futures. They also
agreed that firms should have to register with
only one agency to sell these futures, so long as
the firms provide some sort of notice to the
other agency.
"CFTC and SEC staffs also have reached
tentative agreement on initial standards for
trading single-stock futures, such as harmonizing
margin requirements, restricting dual trading,
testing sales and supervisory personnel, and
establishing uniform listing standards," the letter
said.
One area where agreement was not reached was
duplicate regulation. A firm registered with one
agency should not have to comply with the
entire regulatory rulebook of the other agency,
the letter said. However, some "core provisions"
will have to be maintained, and just what those
core provisions should be has not been resolved.
"The agencies agree to work diligently in the
coming months to reach a further consensus on
the regulatory issues and to provide a
comprehensive legislative proposal to your
Committees...before Congress adjourns," Levitt
and Rainer told Lugar and Gramm.
"Notwithstanding the many challenges that we
face, we believe it is possible to craft a strong
yet flexible regulatory framework for single stock
futures. "
The failure to reach an agreement on
single-stock futures will be a disappointment to
US futures exchanges, and to the Chicago
Mercantile Exchange in particular. The CME has
found great success in recent years in offering
various types of equity index futures to
institutional and retail customers, and has
persistently urged Congress to end the ban on
single-stock futures.
However, there are other interests that will
welcome the delay. Democrats on the House
Commerce Committee are pressuring the SEC not
to weaken customer protection and market
integrity regulations, and securities exchanges
are worried that these futures will draw volume
away from their trading floors. End
Bridge News, Tel: (202) 220-3751
Send comments to Internet address:
futures@xxxxxxxxxx
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