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Dissent of Commissioner West q /1'4/90 

.... I. Introduction 

The majority has misinterpreted the forward contract 

exclusion to the extent that a thorough dissent is obligated. It 

is important that the Commodity Futures Trading Commission issue 

statutory interpretations to provide guidance as a matter of 

public policy when it is in the public interest.!/ Nevertheless, 

the Commission is not under any compulsion to issue statutory 

interpretations. Usually guidance to affected parties is 

prpvided by staff, in formal no-action letters or informally. At 

other times, if an issue bears significantly on the public 

interest, a statutory interpretation by the Commission may be a 

more appropriate instrument of guidance. 

In examining the public policy needs to be fulfilled by 

issuing this· interpretation, we should be asking whether there· 

has been a disruption of the 15-day Brent market resulting from 

uncertainty about the status of transactions on that market under 

the Commodity Exchange Act, 7 U.S.C 51, ("Act"). If there has 

been a disruption of that.market, has it adversely affected the 

public. If there has been a disruption of the market that causes 

harm to the public interest, will this statutory interpretation 

provide the necessary relief. 

!/ See, Transcript of CFTC open meeting dated June 20, 1990, p. 

28-30, comments of Commissioner West. 
2 

The statutory interpretation endorsed by the majority was 

adopted in response to inquiries by some participants in the 

market for 1s~day Brent contracts who were very disturbed by 

rulings in ~ransnor (Bermuda) v. BP North America Petroleum. et. 

st!.:., 86 Civ. 1493 (WCC)(S.D.N.Y.), finding that certain Brent 

15-day contracts were United States futures contracts within the 

meaning and jurisdiction of tho Act. As discussed below, under 

Section 4(a) of the Act, futures contracts traded off-exchange 

are illegal. Thus, some Brent market participants found the 

legal status of their contracts in potential jeopardy from 

private lawsuits. They claimed that the success of the Brent 

market itself was threatened,_or that they would be unable to 

participate in that market •. 

Immediately following the issuance of the Transnor opinion, 

there was a reported decrease in trading volume on the 15-day 

Brent market. The causes of that decrease have been somewhat 

uncertain since there were other contemporaneous events that may 

have affected activity.II Yet according to a leading reporting 

service, "Brent trading in April was higher than in April last 

year [1989] and not that much lower than April 1988 ••• despite 

the [Transnor] Opinion on April 18 [1990] ••• "1/ Also, volume of 

15-Day Brent cargoes traded daily appears not to be declining. 

In fact, that reporting service indicated that August 1990 volume 

11 Ig., p. 26, comments of Ms. Medero, General Counsel, CFTC. 

Weekly Petroleum Argus., May 2~, 1990, p. 4. 
3 

was significantly greater than that of July 1990, which in turn 

was greater than June 1990.i/ 

Despite 'bhese indications that.the market has not been 

severely disrupted, the stability of Brent as a source of crude 

oil supplies is a vital public interest, particularly during 

these times of crisis in the Middle Bast with oil supplies from 

the Persian Gulf disrupted. Also, during such volatile times, 

the need of oil producers, refiners, distributors, retailers and 

consumers for a means of hedging price risks and for reliable 

pricing cannot be ignored. Thus, the importance of the Brent 

market itself and the importance and complexity of the forward 

contract exclusion warrant a thorough examination. It is 

reasonable to assume that there is a public interest involved 

which warrants consideration of a statutory interpretation. 

II. The Role of the Statutory Inter.pretation 

Even if the Commission desires to grant relief to a party or 

parties, the Conunission is only authorized to do so within the 

confines of the Act. In interpreting the Act, the Commission 

looks at the language of the statute itself, its legislative 

history, court decisions, Commission case law and prior 

Commission statutory interpretations. Before commenting on the 

nature of th~ 15-day Brent market transactions, it is necessary 

to examine relevant legal authority. Statutory interpretations 

must rest solidly in the law. The appropriate role of a 

. !/ weekly Petroleum Argus, 24-30 _August, 1990, p. 8. 
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4 

statutory interpretation is to clarify existing law, not to enact 

new legislation or engage in a rulemaking. 

III. Futur,es Contracts and the Forward Contract Exclusion 

Section 2(a) of the Act charges the Commission with 

jurisdiction over all naccounts, agreements ••• and transactions 

involving contracts of sale of a commodity for future 

delivery ••• " 7 u.s.c. §2. In Section 3 of the Act, Congress 

declared that these contracts "known as 'futures' are affected 

with a national public interest." 7 u.s.c. §5. In fact, Congress 

found that regulation of futures trading was a necessity due to 

the importance of the markets for hedging and because, as· Section 

3 states, "the prices involved in such transactions are generally· 

quoted and disseminated thro~ghout the United States and foreign 

countries as a basis for determining prices ••• n In the 

regulatory scheme devised by Congress, under Section 4(a) of the 

Act, 7 u.s.c. S6(a), United States futures contracts can only be 

traded on boards of trade designated by the Commission as 

contract markets. This exchange trading requirement provides 

protection to these markets and to the public by assuring that 

all futures trading takes place in an environment of 

self-regulation with federal oversight by the Commission. 

Congress, the courts, and the Commission have not issued a 

formal definitive list of the elements of futures contracts. 

Nevertheless, certain indicia have been recognized generally as 

characteristics of futures coatracts: 

(1) A futures contract is an agreement for the purchase or 

sale of a conunodity for delivery in the future at a 

price that is agreed upon when the contract is 
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5 

initiated.2./ 

(2) Futures contracts are entered into primarily for the 

purpose of assuming or shifting the risk of changes in 

the value of commodities rather than for transferring 

ownership of the commodities themselves • .§./ 

(3) Futures contracts generally are not entered into for 

the purpose of obtaining delivery of the underlying 

commodity, but are discharged through offsetting 

transactions or other buy-back arrangements.1/ 

There are also certain facilitating characteristics of futures 

contracts including: margin requirements, standardized contract 

terms, a clearinghouse, competitive trading on a centralized 

market and price dissemination which may or may not be present.ii 

All. of these characteristics are useful, but they are not a 

checklist. Instead, "no bright line definition or list of 

characterizing elements is determinative. 11 2./ Thus, whether ·or 

2./ The Regulation of Leverage Transactions and Other 

Off-Bxchange Futures Delivery type Instruments - statutory and Regulatory Intemretation by the Office of General 

Counsel, CFTC, 50 P.R. 57, 11656 (March 25, 1985). 

~/ In Re Stoval [1977-1980 Transfer Binder) Comm. Fut. L. Rep. 

(CCB) 120,941 (1979). 

1/ In the Matter of First National Marketing Corporation [1984-1986 Transfer Binder] Comm. Fut. L. Rep. (CCB) 1 

22,698 (1985) at 30,974-5. 

~/ CFTC v. Trinity Metals Jl Kansas City, Inc. No. 

85-1482-CV-W-3, (D.W.D. Mo.) (Jan. 21, 1986). 

21 CFTC v. Co Petro Marketing Group, Inc. 680 P.2d 573, 581 

(9th Cir. 1982). 
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6 

not a given instrument is "a futures contract must be determined 

on a case-by-case basis with a critical eye toward the 

transaction's bnderlying purpose ... .!Q./ 

As the majority discusses, Congress has excluded or carved 

out deferred delivery or forward contracts from the definition of 

futures contracts and thus from the Act's exchange trading 

requirement and the Commission's regulatory jurisdiction. 

Therefore, Congress decided, beginning in 1921, that the Act's 

regulatory scheme was not required to govern, as the draft 

statutory interpretation stated, "••• private commercial 

merchandising t~ansactions in which actual delivery is 

contemplated but deferred for reasons ·.of commercial convenience 

or necessi~y." ll/ Further, as the majority's interpretation 

discusses, forwar~ contracts have evolved into a variety of 

transactions. However, important characteristics of forward 

contracts remain: 

(l) The parties to forward contracts are commercials; 

ill l!L. 

ll/ CFTC Draft Statutory Interpretation Concerning Forward 

Transactions, June 29, 1990, ("Draft Views") p. 10. In the 

final version of the statutory interpretation as endorsed by 

the majority, this language was revised to read " ••• private commercial merchandisingltobligations to deliver but in which 

delivery is deferred for reasons of commercial convenience 

or necessity." The requirement for contemplation of 

delivery was deleted. CFTC, Statutory Interpretation Concerning Forward Transactions, September , 1990 

("Majority Views") p. 11. 
7 

(2) The parties use these contracts in connection with their 

business such as merchandising products or obtaining 

supplies;- and 

(3) The parties contemplate delivery, and have the capacity 

to make or take delivery. In fact, delivery routinely 

occurs.ill 

Because such contracts occur between various commercials to meet 

their individual business needs, they frequently are not 

standardized, but may be negotiated by the parties or "tailor 

made" to meet their specific needs.ill Historically, the forward 

contract exclusion has been viewed as covering only contracts for 

sale which are entered into with the expectation that delivery of 

the actual commodity will eventually occur through performance on 

the contracts • .!!/ 

ll/ Characteristics Distinguishing Cash and Forward Contracts 

and "Trade" Qptions, Interpretive Statement of the Office of 

General Counsel, CFTC, 50 F.R. 189, 39656 (September 30, 

1985) and cases and legislative history cited therein. 

Also, in this interpretive statement, the Office of General 

Counsel concluded that one type of minimum price guarantee 

contract came within·the forward contract exclusion of 

Section 2(a)(l) "since legally the contract's predominate feature is its use by producers and merchants to market a 

commodity through actual delivery. The producer, absent 

depredation to the crop, must make delivery of the 

commodity. The merchant or the elevator must accept that 

delivery. Because both parties are participants in normal 

commercial channels for these commodities, each is in a 

position to fulfill all obligations under the contract, and 

both parties intend tha'l)i.commercial marketing of the 

commodity by means of delivery will occur." Id. at 39660. 

ll/ I9.t. 

' 14/ ML. 
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8 

Therefore, based on the Act, as well as court and Commission 

opinions based on the Act, forward contracts are sales of a 

commodity where delivery is deferred,15./, but it is contemplated 

and ;outinely occurs.ll/ The parties to forward contracts are 

commercials who will be using the commodity in connection with 

their businesses.ill 

Because forward contracts are delivery contracts used to 

move the underlying commodity into the stream of commerce, 

parties to forward contracts are not viewed as merely speculators 

in the value of the commodity, rather they seek profit in their 

businesses from producing, processing, distributing, storing, ·or 

consuming the commodity .• 18 / Further, the parties to forward · 

contracts are-generally not hedging in the same manner as parties 

to futures contracts. While parties to forward contracts may be 

seeking to insure a price, they are also using these contracts to 

ll/ Section 2(a)(l) of the Act, 7 u.s.c. §2(a)(l). 

li/ In Re Stovall, Supra. a 

ll/ Characteristics Distinguishing Cash and Forward contracts 

and "Trade" Options., Supra., and cases cited therein. 
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9 

make or take delivery.l9/ The crucial point is that forward 

contracts closely resemble actual cash sales. 20/ 

IV. Review of eomments on the Draft Statutory Interpretation 

In developing this interpretation, the Commission took the 

unusual, but prudent, route of accepting written comments on a 

proposed interpretation, a procedure more akin to that found in 

notice and comment rulemaking.ll/ Those comments have proved 

enlightening and a valuable source of information. Such is the 

purpose of a comment procedure. 

The Chicago Board of Trade ("CBT"), in its comment, provided 

historical information comparing settlement and clearing methods 

used at the CBT 70 years ago, before the advent of the Chicago· 

Board of Trade Clearing Corporation, with the methods currently 

used on the Brent market. The CBT stated that at the time 

Congress first restricted futures trading to designated 

ll/ Hedging transactions normally represent substitutes for 

transactions to be made later in a physical marketing 

channel rather than the actual physical or cash transactions 

themselves. CFTC Regulation 1.3(z)(l). By contrast forward 

contracts are transactions in the physical or cash marketing 

channel. see. Johnson and Hazen. commodities Regulation, Second Edition, Little Brown, Boston, 1989, Vol. I, p. SO, 

for a discussion about the use of futures contracts to hedge 

commercial transactions involving cash positions or forward 

contracts. 

2JJ./ "A forward or deferred delivery contract closely resembles a 

cash transaction, except that delivery is made at a date in 

the future." Markham, Bisto:r:y of Commodity Futures 

Regulation. Praeger, Nett.York (1987), p. 202. 

ll/ While the Commission accepted written comments, it did not 

publish the draft interpretation in the Federal Register for 

the purpose of inviting public comments from all interested 

parties. 
10 

exchanges, CBT used a "ring" method of clearing and settlement 

closely resembling today's Brent market. CBT argues that "rather 

than distingu.i"shing 15-day Brent contracts from futures 

contracts, the daisy chains, book-outs and cancellation 

agreements of circles and loops confirm that the 15-day Brent 

market is composed of the very kind of transactions Congress 

intended to be regulated as futures contracts."ll/ 

CDT also argued that the 15-day Brent contracts are 

standardized, stating that "Brent contracts are so highly 

standardized that Brent traders can strike a deal with the magic 

words 'I will do you a Brent at $X per barrel'."ll/ This view is 

supported by.others. " ••• [T]he Brent 15-day market does exhibit 

several characteristics similar to a 'futures' market. In 

particular both involve highly standardized contracts which can 

be used for speculation, hedging and arbitrage."ll/ The majority 

also recognizes that "15-day Brent contracts typically 

incorporate standard terms and conditions."ll/ 

ll/ Letter to Ms. Jean A~ Webb, Office of the Secretariat, CFTC, 

from Thomas R. Donovan, President and Chief Executive 

Officer, CBT, dated July 13, 1990, p. 14. 

ll/ CDT, p. 20. quoting R. Mabro, et al., The Market for North 

sea Crude Oil (1986) p. 173-174. 

1!/ Blanche Sas, Legal Aepects of the 15 Day Brent Market lPart 

!.L. J. of Energy and Nat. Resources L., 109, (1987) ("Sas 

I"), p. 116. a 

2..5./ Majority Views, Supra~ p. s. The majority notes that while 

the contracts involve standard terms and conditions, they 

involve individual negotiations which may address a number 

of terms and conditions particularly credit terms. 
11 

The Chicago Mercantile Exchange ("CME") urged the Commission 

to make an independent examination of the Brent market before q, • 

issuing a pronouncement based on a few letters from market 

participants and brokerage houses. .•.: 

The CME also. argued that 

inclusion of the term "traders" as commercial participants in 

forward contracts goes beyond the traditional scope of the 

forward contract exclusion.Ill The Draft Views of the Commission 

included institutional traders as 15-day Brent market 

participants. The Statutory Interpretation endorsed by the 

majority has deleted the specific.reference.ll/ The CME argues 

that "allowing speculators to qualify as commercial users 

effectively obliterates the line between the futures and forward 

contract markets, and does violence to the legislative intent 

that speculation be controlled by trading in an exchange 

environment ..... 28/ 

The New York Mercantile Exchange expressed concern that the 

draft statutory interpretation focused on capacity to make or 

take delivery instead of the traditional standard of intent to 

deliver. If financial capacity is sufficient, "any well 

capitalized speculator (trader) may actively participate in 

26/ Letter to Ms. Jean A. Webb, Office of the Secretariat, CFTC, 

from William J. Brodsky, President and Chief Executive 

Officer, Chicago Mercantile Exchange, dated July 13, 1990, 

P• 2. at 

ll/ .§tt, Draft Views, Supra, p. s. and Majority Views, Supra, 

p.s. 

" 28/ 1fL.. 
12 

unregulated off-exchange futures trading under the guise of the 

forward contract exclusion."ll/ 

Some of ehe most revealing comment letters came not from 

futures exchanges, but from Brent market participants themselves. 

The British Petroleum Company and its subsidiaries ("BP") argued 

that "the Commission should acknowledge the use of Brent and 

other forward markets for risk management purposes including 

hedging and for pricing."12./ Exxon Corporation and its 

subsidiaries argued that. "the Commission needs to explicitly 

acknowledge that contracts entered into without an intent to 

deliver (for example, to hedge or price) are nonetheless still 

.'forward contracts' outside the scope of the CBA."ll/ Those 

commenters seem to want the Commission to exclude from regulation 

even those hedging and pricing activities which Congress 

determined the Commission should regulate under the Commodity 

Exchange Act.ill In fact, it has been previously noted that 

th~se markets are being used for these and other purposes. 33 / 

li/ 

ll/ 

Letter to Ms. Jean A. Webb, Office of the Secretariat, CFTC, 

from R. Patrick Thompson, President, New York Mercantile 

Exchange, dated July· 13, 1990, p. 5. 

Letter to the CFTC from Stephen R. Pettit, Chief Executive, 

Oil Trading, BP Oil International Limited, dated July 12, 

1990, p. 2. 

Letter to Office of the Secretariat, CFTC from Kenneth P. 

Cohen, Assistant General Counsel, Exxon Company, 

International, dated July 12, 1990, p.3. 

a 

Section 3 of the Act, 7 u.s.c. §5. 

33/ Sas, (I), p. 112, in a 1987 article citing R. Bacon, The 

Brent Market, An Analysis of Recent Developments, WPM8, (Footnote Continued) 
15 

elements to their markets not covered by the interpretation, such 

as further standardization of contracts, or the installation of a 

true clearingSouse similar to those associated with regulated 

futures markets. 

The Commission's statutory interpretation refers to U.S. 

commercial entities participating in other "similar markets" both 

domestic and foreign.J.2./ It is said by certain market 

participants that these similar markets use "delivery processes 

analogous" to those of the 15-day Brent market.ill Unfortunately 

the scope of markets·covered is not known. One commenter 

·recognized that an exclusion from the Act's definition of futures 

·contracts, and.thus:the Commission's jurisdiction, "unless 

narrowly drafted could have far reaching and objectionable 

effects."il/ 

v. 15-Day Brent Market and the Forward contract Exclusion 

After reviewing the characteristics of futures contracts 

generally relied upon by the Commission and the courts, the 

similarity of 15-day Brent contracts to futures contracts is 

apparent. They are both agreements for the purchase or sale of 

commodity for delivery in the future at a price that is agreed 

upon when the contract is initiated. 

contracts and 15-day Brent contracts 

ll/ Majority Views, Supra., P• 8. 

a 

40/ l!L. 

Also, both futures 

have standardization of 

!!/ Letter to Wendy L. Gramm, Chairman, CFTC, from Wayne Klein, 

Bureau Chief, Securities Bureau, Department of Finance, 

State of Idaho, dated June 8,.1990, p. 1. 

a 
16 

contract terms and conditions, which " ••• facilitate the formation 

of offsetting or liquidating transactions. 0 il/ The ability to 

offset is important because it allows parties to avoid 

delivery. 43/ The Brent market is marked by a high degree of 

offset.ill 

Like futures contracts, many 15-day Brent contracts are 

entered into for the purpose of hedging or speculation rather 

than for the purpose of transferring ownership in crude oil. 

This is supported by the views of an academic authority4SI and in 

the comments of Brent market part~cipants themselves.ill Thus, 

as in Co Petro, if we look at many 15-day Brent contracts with a 

"critical eye toward their underlying purpose", they appear to be 

indistinguishable from futures contracts.ill 

Fifteen-day Brent contracts do not sufficiently resemble 

forward contracts to be excluded from coverage by the Act. The 

ill co Petro, Supra., P• 580. 

ill 1g • 

.ill See, Bxxon, Supra. p.2, and footnote 36. 

ill Sn, Sas I. Supra, P• 112. 

ill bJi, .. _BP, . Supra. , p. 2, Exxon, Supra. , p. 1, and Goldman, 

Sachs and Company, Supra., p. 13. 

il/ Co Petro, Supra. p. 581. Admittedly, 15-day Brent contracts 

are not offered to the general public. The absence of 

public participation is·not in and of itself determinative 

since most recognized f~ures markets have only limited 

participation by the general public. The Brent market also 

does not rely on margin monies to secure transactions, 

relying instead on credit evaluations or letters of credit. 

Credit evaluations and letters of credit are utilized by the 

recognized futures markets as.well as margin funds. 
17 

market is not limited to commercials in the traditional sense of 

those who produce, process, use or even handle the underlying 

commodity. I~ fact, commercial oil firms may not even be the 

most active participants in the 15-day Brent market.ill Since 

many of these market participants are not commercials, they are 

obviously not using 15-day Brent contracts to merchandise 

products or obtain supplies. Bven commercial oil firms may not 

be using the market for these purposes. Finally, it does not 

appear that the market participants contemplate delivery or that 

delivery routinely occurs. Instead the statutory interpretation 

endorsed by the majority_ focuses on the "book-outs", "circles" 

and "loops" that characterize the 15-day Brent market. 

Since many or even most 15-day Brent contracts do not meet 

the generally accepted criteria for forward contracts, a 

statutory interpretation is inappropriate. The statutory 

interpretation should not be used to expand the definition of 

commercials to include speculators who do not use the underlying 

commodity in their trade or business, much less to include those 

ill During the period 1983-1988, major integrated oil companies, 

other integrated oil companies, state-owned enterprises, non-integrated oil producers and non-i~tegrated refiners 

made approximately 33% of the sales and 331 of the purchases 

In the Brent market. During the same period, trading 

operations of U.S. investment banks, Japanese trading 

companies and other trading companies made approximately 571 

of the sales and approximately 571 of the purchases in the 

Brent market. The remainder of the transactions were by 

companies not classifie<fa Letter to the Office of the 

Secretariat, CFTC, from Kenneth M. Raisler, Rogers and 

Wells, dated July 23, 1990. The Draft Views, Sgpra, p. 5 

specifically included institutional traders as 15-day Brent 

Market participants. The Majority Views, Supra, p. 5 have 

deleted the specific referenc~. 
18 

who do not contemplate delivery of that commodity. A statutory 

interpretation cannot be used to change the law. 

VI. Alternati'Vt!s 

A. Adjustments by the Brent Market 

The Brent market generally does not seem to fall within the 

forward contract exclusion; however, many 15-day Brent contracts 

may fall within the exclusion. In these transactions, delivery 

between commercial oil firms does occur, or delivery is at least 

intended, and the oil enters the stream of commerce. Brent 

market participants have the obvious alternative of limiting the 

nature of their transactions to .those within the scope of the 

forward contract exclusion. 

B. The Foreign Market Exclusion 

There are policy arguments as to why it may be appropriate 

for the 15-day Brent market to operate outside the regulatory 

structure adopted under the Act, such as the foreign nature of 

the market and regulatory oversight by a foreign government. 

While the forward contract exclusion does not seem appropriate, 

there may be another way under the Act in which the 15-day Brent 

market could operate outside the restrictions of the 

exchange-trading requirement of Section 4(a).ii/ One of the 

commenters argues that the Brent market could be determined to be 

••• "a board of trade, exchange or market located outside the 

United States ••• "fill/, and thus 15-day Brent contracts would not 

49/ see Majority Views, Supra, p. 9, footnote 5 • 

.. 50/ CBT, Supra. P• 33. 
19 

be subject to the requirement that such contracts be made on or 

subject to the rules of a designated contract market.51/ In such 

an approach, we would have to examine the market participants' 

contacts with the United States which were persuasive in 

determining standing to the judge in Transnor, as well as to 

recognize current British government regulation of 15-day Brent 

transactions. 

C. New Bxemptive Authority 

It should be noted, however, that the recognition of the 

Brent market as a foreign exchange would not necessarily give 

protection to similar domestic and foreign markets that use 

analogous delivery processes. Those other markets have not been 

closely examined or completely identified. 

The cleanest way for the Commission to permit such markets 

to operate without contract market designation would be for it to 

have the authority to exempt certain transactions by rule, 

regulation or order from the exchange trading limitation of 

Section 4(a) of the Act, when in the public interest to do so. 

The Brent situation may demonstrate the desirability of such 

authority. Congress could provide the Commission such exemptive 

authority, and the Commission could then exercise that authority 

in a manner recognizing historic concerns about fraud and 

manipulation. Further, Congress could enact such an exemptive 

provision without creating potential enforcement gaps that could 

a 

.. 51/ 7 u.s.c. § 6(a). 
20 

occur from a change to the Commission's exclusive jurisdiction 

under Section 2(a)(l) of the Act. 

v. Conclusion~ 

The forward contract exclusion is a source of needed 

flexibility for the Commission in deteD'Ilining its jurisdiction 

under the Act. However, one does not have to be a strict 

constructionist to conclude there are limits to the Commission's 

flexibility in using statutory interpretations. Broadening the 

applicability of the forward contract exclusion to include 

transactions by traders who are speculators, who are not 

'contemplating delivery, who are using generally standardized 

contracts, who-routinely offset their .positions and ~ho do not 

use the underlying commodity itself is an erroneous 

interpretation of the Act. 

Neither does the Act provide a general "commercial 

I 

exemption" as one commenter has suggested.~/ While, in some 

cases, the general public may need more or different protections 

than commercial entities, clearly the necessity of federal 

regulation was premised on the use of and dependence by 

commercials on the hedging and pricing functions of the futures 

markets. While I have no doubt that the majority has made a good 

faith effort to interpret existing law in a very difficult area, 

unfortunately, their effort serves to change the law instead. 

The majority has attempted to provide the Brent market 

participants with the assura,w::e they desire. Unfortunately, it 

~ ill See, Goldman, Sachs and Company, Supra, footnote 33. 
21 

is doubtful whether the majority's interpretation will survive 

close scrutiny, leaving the Brent market participants with a 

false sense ox security. Furthermore, the majority's actions may 

actually have unfortunate consequences for the Brent market 

itself in preventing its evolution into a full futures market. 

In trying to help Brent market participants t~ough this 

interpretation, the Commission may be acting contrary to the 

public interest. We must ask what are the myriad fraudulent 

trading practices that can be concocted to escape federal 

regulation by being declared a "forward contract" under this 

greatly expanded·definition.