CFTC, SEC Agree on Single Stock Futures

September 15, 2000

The Commodity Futures Trading Commission and the Securities and Exchange Commission have reached an agreement to lift the ban on trading single stock futures. Known as the Shad_Johnson Jurisdictional Accord, this ban has prohibited the trading of these instruments since 1982.

Last December, Senate Agriculture Committee Chairman Richard Lugar and Senate Banking Committee Chairman Phil Gram asked the two agencies to recommend to Congress that the ban be lifted.

"I applaud the efforts of these two agencies to reach an agreement on this complex issue," Lugar said. "Although I have not received the final accord, CFTC Chairman Bill Rainer called me to tell me that a deal had been reached. Based on this conversation, I am confident that this agreement is a sound and reasoned one, which will increase the likelihood that Congress passes the Commodity Futures Modernization Act of 2000."

REUTERS reports that apart from allowing the trading of single_stock futures, the legislation would also keep privately negotiated, or over the counter (OTC), derivatives free of government oversight and restructure the regulation of traditional futures exchanges.

"This agreement should make it possible for Congress to enact legislation that will maintain the competitiveness of American financial markets, reduce systemic risk, and create much needed legal certainty for the over the counter derivatives market," Treasury Secretary Lawrence Summers said in a statement.

There have been fears that outdated regulations are hurting U.S. competitiveness in the lucrative global derivatives business, reports REUTERS. However, even with the major dispute resolved, its chances of passage in the short time left in the current congressional session remain unclear.