Commodity Trading Reforms Discussed

A special panel of the Chicago Mercantile Exchange convened for the first time Wednesday to discuss possible reforms of trading practices that are the focus of a sweeping federal fraud investigation.

Any proposed changes could take months to draft and then would have to be submitted to the Commodity Futures Trading Commission, the federal agency that regulates the industry, Merc spokesman Andrew Yemma said following the closed meeting.

Separately, the House Agriculture Committee designated Rep. Glenn English (D-Okla.) to direct a congressional investigation into trading practices in the futures and options markets.

English, chairman of the panel’s subcommittee on conservation, credit and rural development, said the probe would focus on the CFTC’s regulation of the markets and on the self-regulating ability of the markets themselves.

Yemma described the meeting of the Merc’s special committee as the first in a series planned for the nine-member committee in Chicago and New York to discuss trading rules and procedures.

Invites Abuse

The Merc established the panel following disclosure of a two-year undercover federal probe of alleged widespread fraud in the Chicago futures markets, in which investors may have been cheated out of millions of dollars by illegal trading practices.

One practice under increasing scrutiny has been dual trading, in which traders can buy and sell for themselves and their customers simultaneously.

The longtime practice is legal but critics say it invites abuse of the traditional open-outcry style of commodities trading.