The Commodity Futures Trading Commission's proposed suspension on London commodity options sales threatens to wipe out the burgeoning market in dealer options, an obtrusive and independent sector that has been trouble-free in its seven years of operation.

The widespread publicity about allegedly fraudulent practices in London options sales resulted in an eleventh hour attempt by the commission to salvage its reputation this week by proposing a near total suspension of options sales in the United States - including the $25-million-a-year dealer market. If such a suspension is finally approved, a number of options writers, retail firms and customers plan to file federal lawsuits to block its implementation.

Thousands of customers who currently hold dealer options that are due to expire after such a suspension could take effect stand to lose millions of dollars because they would be unable to resell the unexpired value of their options back to dealers whose operations would be halted, industry sources explained.

The commission, which has been embroiled in a number of widely-publicized controversies since its inception three years ago, took the action as part of its preparations for two congressional confrontations with the next five weeks.

On Feb. 22, the commission is to defend its S1.8 million supplemental budget for regulation and enforcement of an experimental options trading program on U. S. exchanges - a proposal which is itself jeopardized by congressional criticism of the CFTC's inability to curb fraud in London options sales.

Early in March, CFTC officials expect to undergo rigorous questioning by House and Senate committees at its reauthorization hearings. The commission's initial authority to operate expires Sept. 30.

In a move that most observers described as politically motivated and "an attempt to placate Congress before they read the riot act to the commission," Vice Chairman John V. Rainbolt II's motion suspending sales of all options - except those between commercial trade houses involving their own stocks - was passed unanimously.

The motion came in the wake of the latest round of publicity about allegedly fraudulent London options sales, this time involving the court-imposed shutdown of Boston-based Lloyd, Carr & Co., and the arrest of its president, Alan Abrahams, alias James A. Carr. The FBI identified Abrahams as an escaped felon with a long history of forgery and bad check arrests.

Late yesterday, the commission put the draft suspension and accompanying Federal Register notice on the agenda for its Tuesday morning session. The commissioners are expected to approve unanimously its publication in the Federal Register at the meeting. The notice is to give 30 days to the public to comment on the proposal before final action is taken - a requirement necessary to avoid immediate legal action by companies on due process grounds.

The leading - and possibly the only - U.S. market maker of dealer options is Mocatta Metals Corp. of New York, which offers fixed striking price/fixed maturity date metals options to brokerage houses for resale. Among the brokerages which retail Mocatta options to private investors are Shearson Hayden Stone Inc., Bache Halsey Stuart Shields Inc., and Conti Commodity Services Inc.

Mocatta, a division of The Mocatta Group of Standard Chartered Bank Ltd., a London-based multinational banking complex, primarily deals in industrial silver, gold, platinum and palladium. Its presence in the commodity futures and options markets is an outgrowth of those operations, according to Dr. Henry Jarecki, chairman of Mocatta Metals.

Jarecki, a psychiatrist who gave up his teaching post at the Yale University Medical School to test his theories of international metals price movements, is the witty, articulate and outspoken mastermind behind Mocattas $50 million computerized trading model.

He also is, as his attorney points out, extremely conservative in his trading and his decision-making.

As a result, Jarecki has led Mocatta into a cautious program for retail options firms with an unusual number of customer protection and financial requirements that the retailers must meet.

Before the CFTC issued its proposed options regulations. Mocatta tightened its disclosure requirements for firms that retail its options, segregated both customer's premiums and profits in escrow accounts to guarantee performance of the orders and set up a compliance and auditing program to check on the operations of those selling their options.

"The CFTC has said, in effect, that it can't tell the good guys from the bad guys," Jaecki said in a recent interview. During the congressional hearings on the establishment of the CFTC, Jarecki testified on the metals and options markets, and was a member of the advisory committee on options which reported to Commissioner Rainbolt.

"During the advisory committee meetings my advice was unequivocal: to avoid possible scandals and abuses, the commission needed to do three things: demand segregation of customer funds, limit participation to firms with high net worth and implement exchange trading of options in the United States as soon as possible," he said.

"If the commission had done those things a long time ago there would have been fewer abuses by London options firms and maybe this whole problem would have been avoided."

Jarecki noted that the two major abuses in London sales: high markups of premiums and "bucketing," or the pocketing of customers' funds without executing their orders.

Jarecki said his firm has never been involved - or even mentioned - in any court action or administrative reparations case filed with the CGTC.

And, he emphasized, many of his customers have made and are making money on their options contracts.

Our customers return on investment in gold options has increased 93 percent in the past six weeks," he said. "Of course, the gold markets are up. Options contracts make money when the markets are moving well." Overall, he said, 60 percent of the customers holding Mocatta gold and silver options currently "are in the money," that is, their investment are profitable at this point.

Such statistics are virtually unheard of in the volatile commodity world, where speculators traditionally lose in 75 percent to 85 percent of the transactions, according to industry estimates.