CBOT Chairman Carey Testifies Before U.S. Senate Agriculture Committee Regarding CFTC Reauthorization

Testifying before the U.S. Senate Agriculture Committee today, the Chicago Board of Trade’s (CBOT) Chairman Charles P. Carey commended the U.S. Congress for its excellent work in passing the Commodity Futures Modernization Act (CFMA) and the careful and measured way in which the Commodity Futures Trading Commission (CFTC) has implemented its provisions. Chairman Carey noted that the CFMA gave the Commission and the industry needed flexibility to deal with innovation and brought legal certainty to many products, while preserving regulatory concepts essential to the futures industry. In addition, Carey pinpointed several issues that merit review, but indicated major changes to the current law appear unnecessary at this time.

In his testimony, Carey highlighted four industry concerns that might warrant study and appropriate action.

First, Carey discussed with the Committee a major industry trend toward international expansion and cross-border business arrangements. This development has created significant challenges for regulators at home and abroad, including issues of customer protection, adequate procedures for information collection among regulators, and unequal regulatory treatment with the byproduct of unfair competitive advantages. The CBOT urges that fundamental protections currently provided to our customers not be compromised in the interest of regulatory cooperation.

Chairman Carey shared his thoughts on recent discussions centering on whether an exchange as a for-profit business has a conflict of interest as a self-regulating organization. His response was a resounding “no,” pointing out that for-profit exchanges have an even greater incentive to maintain and increase public confidence and that experience has shown that investors prefer markets that have demonstrated integrity through self-regulation.

A third concern that Carey shared with the Committee relates to the potential impact of a Federal court decision which potentially diminishes the CFTC’s anti-fraud jurisdiction over retail foreign currency transactions. The decision could lead to increased opportunities for fraud. Carey said the CBOT would be happy to work with the Committee, the Commission, and other industry leaders, if Congress decides this issue requires a legislative response.

Finally, Chairman Carey shared his thoughts on security futures, which were allowed for the first time by the 2000 Act. Dual regulation by the CFTC and the Securities and Exchange Commission (SEC) has created challenges and resulted in unnecessary margin inequities, hindering the growth potential and usefulness of stock futures as a risk management tool. The CBOT hopes that these two regulators can work together and resolve this and other issues.

In addition to speaking before the Senate Agriculture Committee on Tuesday, March 8, 2005; CBOT Chairman Carey also will be addressing the Subcommittee on General Farm Commodities and Risk Management of the Agriculture Committee of the House of Representative on Wednesday, March 9, 2005.

The full written statement to the U.S. Senate Agriculture Committee provides more detailed explanations on the topics covered by Chairman Carey during today’s oral testimony. For copies of this written statement, contact the CBOT Communications Department or visit the corporate website at www.cbot.com.