Date: 1982-09-23
Speaker: DE LA GARZA (democrat)
Chamber: H

Madam Chairman. I yield myself such time as I may consume. Madam Chairman. first let me say that we have come to this point after long and careful and arduous deliberations and some degree of compromise both by the chairmen of the CFTC and the SEC and by the Committee on Energy and Commerce and the Committee on Agriculture and their respective staffs. Madam Chairman. I rise in support of H.R. 6156. as arpended by the Committee on Agriculture. H.R. 6156 amends the Federal securities laws to provide for jurisdiction of the Securities and Exchange Commission to cover options on exempt securities. stock indexes. certificates of deposit and when traded on national securities exchanges. foreign currencies. H.R. 6156 is a response to the joint recommendations of SEC and CFTC to resolve disputes that had arisen regarding the jurisdiction of the two agencies. Other proposals recommended by these agencies related to amendments to the Commodity Exchange Act regarding the jurisdiction of the CFTC which are contained in another bill. namely H.R. 5447. Under their Joint proposal. the CFTC would regulate futures contracts on exempt securities (othpr than municipal securities). futures contracts on broad based groups or indices of any securities as well as options on any such futures contracts. No trading would be permitted. however. in futures (or options on futures) Involving individual. corporate and municipal securities. Finally. the CFTC would also have Jurisdiction to regulate trading of options in foreign currencies in the commodities market. These recommendations were adopted by the Committee on Agriculture in title I of H.R. 5447 which is being considered separately by the House. Controversy regarding Jurisdiction of the two regulatory agencies recently gave rise to litigation. and on March 24. 1982. the U.S. Court of Appeals for the Seventh Circuit in the case of Board of Trade of the City of Chicago against Securities and Exchange Commission and the Chicago Board Options Exchange held that the SEC had po jurisdiction of its own to permit trading in options in Government National Mortgage Association (GNMA) certificates. The court held that options on exempt securities such as GNMA certificates were commodities within the purview of the Commodity Exchange Act and under the Jurisdiction of the Commodity Futures Trading Commission and that the securities laws did not extend to such Instruments. This conclusion is consistent with the policy expressed by Congress in the past In providing CFTC with regu latory authority over hedging and price discovery instruments and the SEC with the burden of protecting the efficiency and fairness of the capital formation market. The options contracts covered by the Jurisdictional accord are essentially new instruments which have not been traded yet on any markets. These instruments would provide market participants with a mechanism for risk reduction which is similar to that received by the grain industry for over a century and by the financial community since 1975. In the 1978 amendments to the Commodity Exchange Act. Congress recognized the importance of providing special protections to the public on options contracts and incorporated in the Commodity Exchange Act detailed requirements addressed to this end. While the committee continues to believe that this functional breakdown serves important purposes. it recognizes the pragmatic consideration that the public will be best served by ending the Jurisdictional dispute between the two agencies and supporting the enactment of law of the Jurisdictional accord reached voluntarily by the CFTC and the SEC. Madam Chairman. I yield 5 minutes to the gentleman from Kansas