subject: United States Commodity Futures Trading Commission 1980-1989 [print this page] 1980-After President Carter announces an embargo on certain agricultural good to the Soviet Union, the CFTC orders the suspension of futures trading for two days for wheat, corn, oats, soybean meal, and soybean oil on four exchanges in an emergency action. When silver prices drop dramatically, the CFTC decides not to use its emergency powers.
1981-The CFTC sends a required report to Congress regarding the events in the silver market during late 1979 and early 1980, and on issues involving futures contracts on financial instruments. A comprehensive set of regulations is adopted that governs exchange trading of options on futures contracts under a three-year pilot program. The CFTC grants registration to the National Futures Association and the NFA begins to hire staff and commences operations on October 1, 1982. Regulation 1.61 (now part of CFTC Regulation 150, 17 CFR 150) is adopted and requires exchanges to establish speculative position limits in all futures contracts. The CFTC and the Securities and Exchange Commission jointly announce a basic jurisdictional agreement on the regulatory responsibility of each agency for a variety of financial instruments. This agreement, known as the Shad-Johnson Accord, later becomes part of the Commodity Exchange Act. The CFTC approves the first futures contract settled in cash at expiration, the Eurodollar contract on the Chicago Mercantile Exchange.
1982-The first futures contract based on a stock index, the Value Line Index Average traded on the Kansas City Board of Trade, is approved. The first options on futures contracts since its announcement of the exchange-traded options pilot program, is approved.
1983-The first options, based on stock index futures contract is approved. President Regan signs the Futures Trading Act of 1982. Among other things, this act codified the Shad-Johnson Accord and required the CFTC to act on new contract proposals and rule amendments within specified time periods (365 days for new contracts and 180 days for rule amendments). The final rules governing introducing brokers (IB) and associated persons (AP) of introducing brokers, commodity pool operators, and commodity trading advisors-new registrant categories created by the Futures Trading Act of 1982. At the same time, the Commission authorizes the National Futures Association to perform registration processing functions for introducing brokers and their associated persons, the first time NFA is authorized to perform registration functions.
1984-The CFTC adopts final rules to govern temporary licenses for associated persons and a new system of statutory disqualifications for all registrants. At the same time the National Futures Association is authorized to grant temporary licenses in appropriate cases. Effective September 30, 1985, the NFA is authorized by the CFTC to take adverse action against registrants, subject to appeal to the CFTC. The CFTCs Office of the General Counsel issues a letter to the Toronto Futures Exchange stating that the Commission will not take any enforcement action if the TFEs stock index futures contract on the Toronto Stock Exchange Composite 300 Stock Index is offered and sold in the U.S. The Chicago Mercantile Exchange rules are amended by the CFTC and it allows it to establish a trading link with the Singapore International Monetary Exchange. This creates the first trading and clearing link between a domestic and a foreign exchange. A Study of the Nature, Extent and Effects of Futures Trading by Persons Possessing Material, Nonpublic Information is submitted to its Congressional oversight committees. The first options on domestic agricultural commodity futures contracts on six exchanges are approved. The CFTC authorizes the National Futures Association to perform registration processing functions for futures commission merchants, commodity pool operators, commodity trading advisors, and their respective associated persons. A Study of the Effects on the Economy of Trading in Futures and Options is submit to Congress.
1985-The first option on a physical commodity, Amex Commodity Corporations physical gold bullion option contract, is approved. The CFTC ends its silver investigation. Volume Investors, Inc., a clearing member at COMEX, defaults on a margin call on options on gold futures. The default affects the funds of 100 customers. The CFTC adopts Regulation 4.5, 17 CFR 4.5, which excludes certain, otherwise regulated persons, from the commodity pool operator definition upon the filing of a notice of eligibility, subject to certain limits on trading (August 8, 2003, trading limits are removed).
1986-The pilot program started in 1981 for exchange-traded commodity option contracts not based on domestic agricultural commodities ends. With the successful completion of the pilot program, non-agricultural options continue to trade according to CFTC regulations. The CFTC, the Securities and Exchange Commission, and the United Kingdom Department of Trade and Industry announce the signing of a Memorandum of Understanding (MOU), which will enhance cooperation and mutual assistance in securing compliance with and enforcement of securities and commodities laws in both countries. President Reagan signs the Futures Trading Act of 1986
1987-The CFTC votes to terminate the pilot program in options on agricultural futures contracts and physical commodities, and to continue to allow trading of options on futures in those commodities. The final rules to permit the offer and sale of foreign futures and options in the U.S. and to apply the same customer protection rules to the offer and sale of foreign futures and options as to the offer and sale of domestic futures and options, is adopted. In the biggest one-day price plunge in stock market history, there are no CFTC-regulated systems failures or firm defaults on obligations. The CFTC releases an interim report on stock index futures and related stock market activity during October 1987; a follow-up report was released on January 8, 1988, and a final staff report on February 1, 1988.
1988-During the October 1987 stock market break, President Reagan is presented the Presidents Working Group on Financial Markets (Working Group) report is presented. The CFTC approves the offer and sale of the first foreign option contracts in the U.S.-options to be traded on the SIMEX, the SFE, and the Montreal Exchange. ACC gold bullion warrantsoptions on physical gold bullion, the first warrants contract approved by the CFTC is approved. Proposals to amend daily price limits and trading halt provisions for stock index futures and option contracts traded on the Chicago Mercantile Exchange, the Chicago Board of Trade, the Kansas City Board of Trade, and the New York Futures Exchange are approved. The first domestic futures contracts, based on foreign stock indices and foreign government debt instruments is approved. The following are approved; the CFTC approves the Chicago Board of Trade futures contracts in long-term U.K. gilts, the Japanese Stock Index (TOPIX), and long-term Japanese government bonds, and the Chicago Mercantile Exchange Nikkei Stock Average futures contract
1989-A two-year undercover investigation of the Chicago trading pits conducted by the Federal Bureau of investigation in cooperation with the CFTC and the Department of Justice is disclosed and the CFTC takes a number of market integrity actions. The CFTC unanimously approves rules proposed by the Chicago Mercantile Exchange for the basic Globex system, the first international electronic trading system (trading begins in June 1992). The Chicago Board of Trade (CBOT) institutes an emergency action concerning the July 1989 CBOT soybean futures contract. Before the expiration of the July contract CBOT requires all large traders to reduce their positions. The contract expires in an orderly manner. The CFTC approves final rules regarding the regulation of hybrid instruments that combine characteristics of commodity options with debt, preferred equity, or depository interests. A policy statement concerning swap transactions and rules establishing an exemptive framework for certain hybrid instruments with limited commodity option components is also approved. The major economic analysis of dual trading prepared by its Division of Economic Analysis is released.
