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By DAVE CARPENTER
AP Business Writer
CHICAGO (AP) via NewsEdge Corporation -
Stock-obsessed Americans may soon have a new
financial product to buy and sell: futures
contracts on individual stocks.
The push to approve single-stock futures got a
boost Monday with endorsements at a U.S.
Senate hearing by federal regulators and the
heads of Chicago's big financial exchanges _
eager to offer anything that might help fend off
the threat from upstart electronic challengers.
If a dwindling number of regulatory issues are
settled, according to officials tracking the
matter, single-stock futures could be put to a
vote in Congress before its October
adjournment.
``I was cautiously optimistic before the hearing,
and I'm even more optimistic now,'' William
Rainer, chairman of the Commodity Futures
Trading Commission, which regulates the futures
industry, told reporters.
U.S. markets currently trade in stocks, stock
options and futures, including futures contracts
on broad-based stock-index options.
A future contract on a stock would obligate the
holder to buy or sell the security of a company,
for example Apple Computer Inc., at a specified
future date and price, although it likely would
most often be settled in cash based on the
stock price.
An option, on the other hand, gives the buyer
the right but not the obligation to buy or sell at
a certain time and price.
Futures on individual stocks were banned in
1982, the result of a dispute over which agency
would regulate them, the CFTC or the Securities
and Exchange Commission. But that ban may be
on the brink of being repealed, under heavy
lobbying by the futures industry.
SEC chairman Arthur Levitt told the Senate
Committee on Banking, Housing and Urban Affairs
that the two regulatory agencies have laid the
``cornerstone of an agreement'' providing for
joint regulation.
``We're going to share the regulatory turf,'' he
said, in remarks echoed by Rainer.
If the two agencies can iron out their differences
over margin requirements and other issues,
futures on single stocks and narrow-based
equity indexes could be traded on both futures
and securities exchanges.
Outside experts question whether individual
stock futures would generate huge business.
Single-stock futures contracts are currently
traded in eight countries _ Australia, Finland,
Hong Kong (China), Hungary, Mexico, Portugal,
South Africa and Sweden. Investors on those
exchanges bought or sold about 2 million
individual-stock contracts last year involving 200
companies _ no U.S. companies among them.
In comparison, about 1.3 billion contracts were
traded worldwide in the derivatives industry last
year.
But the Chicago exchanges, which have
benefited from heavy trading in futures of the
Standard & Poor's 500 and Nasdaq indexes, told
the committee that bans and over-regulation are
limiting their efforts to innovate in order to
survive.
The Chicago Board of Trade and the Chicago
Mercantile Exchange lost their longtime claim as
the world's largest futures markets to the
all-electronic Eurex of Frankfurt, Germany, last
year, when U.S. exchange-traded futures volume
declined by about 5 percent.
``Traditional exchanges now face an onslaught
of new exchanges, electronic trading networks
and over-the-counter markets competing for the
risk management business we founded in
Chicago,'' Chicago Board of Trade chairman David
Brennan said.
Committee chairman Sen. Phil Gramm indicated
he backs the single-stock futures proposal _ in
part for the boost it would give the Chicago
derivatives exchanges, including the Chicago
Board Options Exchange, which remain the
linchpin of the city's economy.
``Whatever we can do to make them prosper,
everybody in America benefits,'' the Texas
Republican said.
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