Directors of the Chicago Board of Trade failed to give the embattled Commodity Futures Trading Commission a vote of confidence in closed-door session last Friday on the eve of the agency's upcoming congressional reauthorization hearings.
The board directed CBOT President Robert K. Wilmouth to support any legislation that would change the CFTC from an independent agency to a division of the Department of Agriculture.
Wilmouth, who is to represent the exchange at House Agriculture Committee hearings next week, also was directed to support for such a change if asked by staff or members of the committee. The motion, which reportedly, passed by a narrow margin, specified, however, that Wilmouth is not to volunteer support of change in status.
A private brokerage firm raised the proposal both at Friday's CBOT meeting and at a Chicago Mercantile Exchange meeting Feb. 6. The proposal was rejected by CME directors.
Regulatory jurisdiction for commodities rested with a special office within the Department of Agriculture until the CFTC began oepration in 1975.
Although the CBOT and CME primarily trade agricultural commodies such as wheat, soyabeans and livestock, both also trade financial futures such as Treasury bills, Treasury bonds, commercial paper and Government national Mortgage Association certificates.
The Securities and Exchange Commission proposed to the General Accounting office last week that the SEC take over regulating financial futures from the CFTC.
A change in the commission's status such as the one supported by the CBOT directors would make the SEC proposal more viable than if the CFTC were to remain an independent agency, observers noted.
Wilmouth said the exchange's position on moving commodity futures regulation backinto the Agriculture Department was not intended to be publicized. "We will not raise the issue ourselves" (at the hearings), he said. He said the vote followed a lengthly discussion about the CFTC and the exchange," he said. "And from that standpoint, there was some sentiment that the jurisdication should be the Agriculture Department."
Leo Melamed, special counsel to the CME and a past chairman of that exchange, said the Merc directors defeated the motion because "it would be a step backward."
Putting the CFTC under the Agriculture Department "would be catastrophic" because it would divide futures market regulations, with one agency handling agricultural financial commodities and another handling financial instrument futures.
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Many government industry sources said, however, that the timing of the CBOT vote would not help CFTC officials answer the agency's critics at the reauthorization and appropriations hearings which are to begin Feb. 21.