In an appeals court ruling that sent shudders through the nation's commodity markets yesterday, the Commodity Futures Trading Commission has been given virtually unfettered power to step into the markets to prevent manipulation.

The Seventh U.S. Circuit Court of Appeals ruled that the CFTC did not exceed its legal authority last March when it closed down the wheat market on the Chicago Board of Trade because a handful of speculators appeared to be cornering the market.

A federal district judge allowed wheat trading to resume two days later, ruling the CFTC had failed to prove there was an emergency that justified the unprecedented action.

But the circuit court, in a decision released Wednesday, said the lower court was wrong because the courts have no power to overrule the CFTC's judgement.

The circuit court's decision was cheered by CFTC officials, who said it firmly established the agency's powers to stop price rigging in the multibillion dollar business.

But Robert Wilmouth, president of the Chicago Board of Trade, called the circuit court "simply wrong."

"The United States Supreme Court is going to have an opportunity to reverse it, I can assure you of that," said Wilmouth.

"I think this decision should alarm the commodities community," added Wilmouth, "and it should alarm everybody who is concerned about unrestricted use of government power."

It was the Board of Trade that went to court to overturn the original CFTC decision.

The dispute between the nation's largest futures market and the CFTC arose after three professional commodity traders -- one of them Vice Chairman of the Board of Trade Leslie Rosenthal -- bought a majority of the contract for wheat to be delivered in March.

The CFTC charged the speculators were in a position to artifically force up prices, because there was not enough wheat in Chicago to fulfill the contracts and the three could force sellers of the contracts to pay outrageous prices to get out of the contracts.

Although prices had only moved up a little, the CFTC declared an emergency in the market, and stopped trading in wheat for the first time ever.

When the Board of Trade asked for a federal injunction setting aside the CFTC'S action, CFTC lawyers contended the courts had no authority to interfere with the agency's decision.