the responsibility for maintaining a viable 45/ Even the General Accounting Office, in stating its views on H.R. 11955, questioned the government's ability to monitor and set margins: "The Federal Government does not have the capa- The situation is unchanged today. The responsible exercise of margin authority by government agencies would still require a significant amount of manpower and funds. This is particularly so in the precious metals markets where the underlying commodities are produced and traded worldwide and markets are influenced by international as well as domestic economic factors. Large expenditures to build up a capability for the government to do what the exchanges are already doing satisfatorily, and at no cost to the taxpayers, seem totally unjustifiable at a time when the government is striving to balance the federal budget. . Finally, the House directly addressed the issue of CFTC margin authority during floor debate on H.R. 13113. Congressman Vanik offered an amendment the stated purpose of which was, ". . . to enable the Commission to be able to Congressman Poage, Chairman of the Agriculture Committee, opposed the Vanik amendment, stating: 45/ 46/ Id. 67 (Letter of Frederic H. Corrigan, Peavey House Report, id. Note 1, at 67 (letter of the 47/ 120 Cong. Rec. H2952 (daily ed. April 11, 1974). "This is a subject on which a great many people but as one begins to study it one finds that this margin is not for the protection of the individual who is buying or selling the contract; this margin is for the protection of the exchange. It is for the protection of the exchange that is handling these deals because the exchange guarantees the performance of the contracts, and if there is failure on the part of a contract then the exchange must make it good. The exchange makes it good through these margins. So we leave the control of the amount of the margin to the exchange itself. We authorize the exchange to set margins, and to change margins as conditions change, and they may change hourly. Conditions may change very promptly as the gentleman said. But then the people who are going to be directly affected are there, and can take steps to protect themselves. If, on the other hand, we were to take away the authority on the part of the exchanges to make these daily and hourly adjustments on margin, we would take away from that exchange the very essential power to protect itself from bankruptcy. If we place the power to set margins in the hands of the Commission then we have taken it away from the exchanges. Just bear in mind you cannot have it in both Following this statement by Chairman Poage, the Vanik amendments were defeated. 48/ Id., 2953. RATIONALE FOR CONGRESS' DETERMINATION TO Introduction The importance of vesting exclusive jurisdiction over futures trading in the Commodity Futures Trading Commission was debated extensively both in 1974 and 1978. The 1974 debate on this issue focused on the CFTC as an independent agency with exclusive futures regulatory jurisdiction vs. USDA, the SEC, (by implication) all other federal agencies, and the states. The 1978 debate on jurisdiction covered the same areas as discussed in 1974 and, in addition, addressed a number of issues raised by specific proposals by the SEC, the General Accounting Office, the Office of Management and Budget, state securities administrators, and others for the sharing of - - the CFTC's jurisdiction with USDA, the states, the SEC, and the Treasury Department. This memorandum lists the public policy and other arguments raised in support CFTC exclusive jurisdiction, both in 1974 and 1978. The arguments are illustrated by quotations from the legislative history and other relevant documents. Briefly summarized, the arguments are: (1) Duplicative regulation by multiple federal (and possibly state) agencies would be extremely burdensome to the futures markets and the users of the markets. (2) Duplicative regulation would be a waste of taxpayers' money and a financial burden on users of the markets, who would ultimately bear the cost of compliance. (3) Duplicative regulation is over-regulation in direct conflict with the policies of both the Carter and Ford Administrations. (4) Summary of arguments against weakening of CFTC exclusive jurisdiction (this section includes quotes from House and Senate Reports and the Commission summarizing the arguments in points 1-3). (5) Regulation by the SEC is wholly inappropriate because of differences between the commodities and securities markets. (6) Other federal (and state) agencies lack the expertise to regulate commodities markets, and where they have tried to do so they have failed. (7) Vesting futures regulatory jurisdiction in any Executive Branch (i.e., policy-making) agency would constitute an inherent conflict of interest. (8) Changes in CFTC jurisdiction could change Congressional oversight responsibility and negate the benefits of the experience of the agriculture committees in this complex area. 1. Duplicative regulation of the futures industry by multi- As noted by Chairman Talmadge at the outset of Senate floor debate on the 1974 Act: "In establishing this Commission, it is the com- During the 1978 reauthorization hearings, specific proposals for shared jurisdiction with SEC over some aspects of futures trading were being considered. Industry witnesses were unanimous in their opposition to such a proposal. For example, the President of the Chicago Board of Trade stated: 1/ 120 Cong. Rec. S16,128 (daily ed., Sep. 9, 1974). "In our opinion, the chaos that would result The Chairman of the Chicago Mercantile Exchange stated: "Moreover, to divide the responsibility for this This same argument is even more applicable to sharing of exclusive jurisdiction with state regulators. The above-quoted testimony of Mr. Rosenberg, Chairman of CME, continued: "The foregoing considerations apply even more The dangers of duplicative state regulation of the commodities industry had also been considered in 1974. For example, Glenn Clark, a former state securities administrator, testified before the Senate Committee that, 2/ 3/ . . . traditional, long-existing, stable commodity trading institutions are now being subjected to a withering crossfire of disparate Reauthorization of the CFTC: Hearings before the Subcommittee on Agricultural Research and General Legislation of the Senate Committee on Agriculture, Nutrition, and Forestry, 95th Cong., 2d Sess., Part II, 173 (1978) (Statement of Robert Wilmouth, Chicago Board of Trade). (Hereafter, Senate reauthorization hearings.) Id., 126 (Statement of Larry Rosenberg, Chicago Mercantile Exchange). 4/ Id. 64 891 080 16 |