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the Treasury. The estimates assume no increase in registration fees through FY 1986.


Mr. WHITTEN. For the record, would you provide a list of all the agricultural contract options that are now traded.

Ms. PHILLIPS. I will be happy to supply that information for the record.

[The information follows:]
Chicago Board of Trade soybean options.
Chicago Board of Trade corn options.
Kansas City Board of Trade wheat options.
Coffee, Sugar and Cocoa Exchange sugar options.
MidAmerica Commodity Exchange wheat options.
MidAmerica Commodity Exchange soybean options.
Chicago Mercantile Exchange live cattle options.
Chicago Mercantile Exchange live hogs options.
Minneapolis Grain Exchange wheat options.
New York Cotton Exchange cotton options.

The sugar option traded on the Coffee, Sugar and Cocoa Exchange is for world sugar and since it was not one of the enumerated agricultural commodities, it was approved as part of the nonagricultural options pilot program.


Mr. WHITTEN. As you probably know, the Administration has proposed a farm bill that would eliminate many of the price supports. You are also probably aware that some people indicate that the farmer could reduce his risk, if there were no subsidies, by trading in agricultural options. Could you give us your best guess of what would happen if a million farmers decided to hedge their crops by buying options? What if all 5.8 million people who live on farms decided to buy options?

Ms. PHILLIPS. If a million or 5.8 million individuals entered the options markets tomorrow and attempted to buy options, in all probability there would be insufficient capital available to enable all of these individuals to establish an options position at a reasonable economic cost. However, as with any new markets, these markets have the potential for growth over a number of years. Although no futures markets approach a million participants, those which do exist are able to accommodate directly or indirectly the hedging demand exhibited by the farm sector.

Ms. WHITTEN. What are the chances of finding equal numbers of offsetting speculators?

Ms. PHILLIPS. Initially, it is not likely that a sudden influx of that number of hedgers could be met by equal speculative or opposite side hedge participation, either in terms of numbers of participants or numbers of contracts. However, development of the markets over a period of years may enable the markets to develop the balanced participation by commercial firms, speculators and floor traders necessary to the development of liquid markets capable of responding to the needs of large numbers of hedgers.

Mr. WHITTEN. What would happen if the striking point of these options is far below the cost of production for farmers?

Ms. PHILLIPS. Options present a mechanism whereby a farmer can shift the risk associated with the price variability. This variability occurs around the market equilibrium price associated with current supply and demand reflected in the underlying commodity price. If supply and demand conditions are such that the price o the commodity is below the cast of production, the farmer would be unable to “lock-in" a price floor that presents the possibility of profitable production. GROWTH OF FUTURES MARKETS

Mr. WHITTEN. What could you do to assure that the cost of op tions would bear any relationship at all to the cost of production?

Ms. PHILLIPS. Options are a mechanism through which a farmer can shift the risk of price declines below a certain minimum level given current prices while preserving the possibility of receiving a price above the minimum level. Options can reduce the volatility in a farmer's expected income and sale prices; however, they do not create a support level for market prices. Option strike prices are determined by the prices of the underlying futures contracts. These futures contract prices reflect supply and demand conditions. It is the Commission's job to ensure that trading in both futures and options is fair, allowing these competitive markets to arrive at this equilibrium price through the forces of supply and demand. It is not within the Commission's authority to mandate minimum prices geared to cost of production or any other variable.


Mr. WHITTEN. How many staff are directly assigned to each Commissioner?

Ms. PHILLIPS. Staff are currently assigned to each Commissioner's office as follows: Chairman Phillips-3, Commissioner West-3, Commissioner Hineman-2, Commissioner Seale-3, and Commissioner Davis-3.


Mr. WHITTEN. Have any claims against the Commission been paid under the Equal Access to Justice Act?

Ms. PHILLIPS. Yes. The Commission has paid one claim to date.

Mr. WHITTEN. What were the amounts and for what purposes were these claims paid?

Ms. PHILLIPS. The Commission paid an award of $5,994.01 to reimburse defendants for attorneys' fees incurred in a New York Federal District Court action.

Mr. WHITTEN. How many are still pending?

Ms. PHILLIPS. There are one civil and three administrative claims pending against the Commission.

Mr. WHITTEN. Please submit for the record a copy of the most recent periodic report of agency activities concerning the Equal Access to Justice Act.

Ms. PHILLIPS. I will be happy to supply the most recent periodic report of the Commodity Futures Trading Commission's activities concerning the Equal Access to Justice Act.

[The information follows:]


1. Name of Agency: Commodity Futures Trading Commission
2. Name(s) and telephone number (s) of persons preparing report:

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g. stayed at the end of the reporting

period pending judicial review of a fee application decision or of an

, underlying proceeding 6. What is the total amount of fees and

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expenses claimed in the adversary adjudications included in:

a. 5f

378, 228

b. 59



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*Reporting periods are as follows: Oct. 1-15, 1981; Oct. 16-31, 1981; Nov. 1-31, 1981; Dec. 1-31, 1981; Mar. 31, 1982, and the end of each 3d month thereafter.


For awards certified for payment by the reporting agency, indicate the following:

Name of appropriation account

Treasury symbol of awards Total $ paid

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8. Estimate the total amount of the reporting agency's administrative costs, in terms

of staff time, direct expenses and overhead, incurred in connection with this Act during the reporting period. Do not include the cost of any awards paid from

reporting agency funds: $_4.900.00 9. Piease describe the effect of the Equal Access to Justice Act on agency operations.

(have agency priorities or litigating strategies changed as a result of the Act? Fave resources been diverted from agency programs to pay awards or administer the Act, and how has this affected those programs? Are existing agency staff resources adequate to handle the processing of applications for awards?) Has the net impact of the Act on the agency been positive, negative, or neutral? what other comments nay be of interest to Congress? (Add extra sheets if necessary.)

As the Commodity Futures Trading Commission has received only four applications for attorneys' fees under the Equal Access to Justice Act in two administrative proceedings, it is too early to assess the impact of the statute upon agency operations.

Please send this report, within 5 days of the end of each reporting period, to:
Administrative conference of the United States; 2120 L Street, NW; Washington,
DC 2.037.

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Mr. WHITTEN. To what do you attribute the almost 7 percent increase in futures contracts traded during 1984?

Ms. PHILLIPS. The nearly 7% increase of volume in futures trading during 1984 compared with 1983 is attributable mainly to growth in financial futures, not including any options. That growth is largely explained by the increasing acceptance of these risk management instruments by the financial community. The six futures contracts with the greatest volume increase during 1984 were TBonds (CBOT), S&P 500 Index (CME), Eurodollars (CME), Deutsche Mark (CME), Crude Oil (NYMEX), and U.S. Treasury Notes (CBOT), in that order. The futures exhibiting the greatest volume decline were soybeans (CBOT), corn (CBOT), Japanese Yen (CME), silver (Comex), soybean oil (CBOT) and GNMA mortgages (CBOT), in that order.


Mr. WHITTEN. Last January, it was reported that options contracts trading occurred at a four-fold increase over 1983. It was also stated that the reason for this increase was “a growing realization of the value of trading options as a risk shifting device.” Who do you think these risk shifters were-hedgers or speculators?

Ms. PHILLIPS. Commission data show that the commercial share of open interest has remained the same between the end of 1983 and 1984 for the five markets that were trading on both dates. These five contracts accounted for 90% of the overall increase in volume of options trading during 1984.


Mr. WHITTEN. Please provide for the record a listing of all new requests received in 1984 on which contracts have not previously been traded.

Ms. PHILLIPS. I will be happy to provide that information for the record.

[The information follows:)

Chicago Board of Trade Long-term Municipal Bond Index.
Chicago Board of Trade Natural Gas.
New York Mercantile Exchange Natural Gas.
New York Futures Exchange Commodity Research Bureau Futures Price Index.
New York Cotton Exchange U.S. Dollar Index.
Philadeplhia Board of Trade National Over-the-Counter Index.


Mr. WHITTEN. Please submit for the record an object class table display of your expenditures for 1984, 1985 and projections for 1986, including a sub-object class display of “Other Services”.

[The information follows:]

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