Senators Seek Shad-Johnson Reforms This Year

May 12, 2000

Three senators, two of them chairmen of powerful Senate committees, are seeking reforms to the Shad-Johnson Accord that prohibits the trading of single stock futures. The prohibition simply prevents the products from trading on regulated markets, they say, since they are being traded, often outside the U.S. regulatory structure on foreign markets.

Sens. Richard Lugar (R-IN), chairman of the Senate Agriculture Committee; Phil Gramm (R-TX), chairman of the Senate Banking Committee, and Peter Fitzgerald (R-IL) Thursday held a news conference on the issue of reauthorizing the Commodity Exchange Act yet this year.

Lugar and Gramm met with Commodity Futures Exchange Commission Chairman Bill Rainer and Securities and Exchange Commission Chairman Arthur Levitt Tuesday to see how Shad-Johnson could be reformed. Rainer and Levitt promised to work over the next two weeks to come up with a framework for legislation and to return with recommendations by May 23, Lugar said.

Fitzgerald said legislation now being drafted to reauthorize the CEA would lift the Shad-Johnson prohibition on futures based on individual stocks. "Single-stock futures could be the product that revolutionizes the futures industry, and Chicago’s exchanges are in position to take the lead in creating this new market," he said.

He said lifting the ban on single-stock futures would give individual investors access to an important risk management tool that now is available only to corporations and large institutional investors.

If Rainer and Levitt can reach an agreement on reform, said Lugar, "I am hopeful that it would serve as the basis for this portion of our legislation and that we would introduce the bill shortly thereafter." He said he hoped a bill could be passed yet this year, before the final adjournment scheduled for early October.