The Commodity Futures Trading Commission has concluded that the kinds of insider trading abuses that plague the securities markets do not occur in futures trading, but it has recommended that a number of regulations be changed to reduce the chances that individuals could benefit by trading on information that is not available to the general public.
In a recent report to Congress, however, the regulatory agency said it did not believe that any new laws were required to police the futures markets for insider trading.
The Securities and Exchange Commission, which regulates trading in stocks and stock options, has concentrated its efforts on preventing individuals with "inside" information about a company from profiting on that knowledge by buying or selling before the information is made public. Generally insiders are company officials, or those with relationships to them, who have a special, so-called fiduciary responsibility to either the company or stockholders.
The CFTC said no equivalent fiduciary responsibility exists in futures trading, although both stock and futures brokers have a fiduciary responsibility to their customers.
The CFTC said the laws and regulations that restrict government employes from using nonpublic information (such as unreleased crop reports or trading positions in futures markets) are adequate.
It said employes of exchanges and clearinghouses affiliated with those exchanges should be barred from trading contracts assigned to those exchanges; they should be barred from giving other traders nonpublic information about those contracts; and employes of the National Futures Association, the industry-wide self-regulatory agency, and auditors that examine more than one exchange should be barred from all trading.
It also said industry officials who sit on the policy-making committees of exchanges or the NFA should be barred from trading until any policy decisions are announced to the public.
The CFTC is also working on developing a more rigorous record-keeping procedure -- called an audit trail -- to ensure that professional traders trade for their customers' accounts before they trade for their own. THE HANDOFF . . .
The NFA early next month will take over all registration responsibilities for brokers who deal on a commission basis with public investors as well as commodity trading advisers and commodity pool operators.
Until now, the CFTC has been handling registration. Andrea Corcoran, head of the CFTC's Division of Trading and Markets, has asked the futures industry to slow down its applications for a few weeks so the commission can transfer files and computer data to the NFA.
The NFA, based in Chicago, was set up several years ago as the futures industry's equivalent of the National Association of Securities Dealers. The NASD oversees brokers and trading in securities that are not listed on stock exchanges. Since all trading in futures contracts occurs on futures exchanges -- such as the Chicago Board of Trade and the New York Commodity Exchange -- the NFA's mandate is not as broad as that of the NASD.
But the NFA, like the NASD, sets rules for its members, audits them and tries to ensure compliance. The agency also runs an arbitration procedure for customers who feel they have been mistreated.