Congress Considers Tighter Rules on Futures Trading

Congress is considering far-reaching proposals to shore up public confidence in U.S. future markets, rocked by allegations of cheating, the chairman of the Senate Agriculture Committee said Thursday.

The proposals include adding muscle to the federal agency that monitors futures exchanges, curbing some trade practices and requiring markets to track trading activity more closely.

Democratic Sen. Patrick Leahy of Vermont told Wendy L. Gramm, chairman of the Commodity Futures Trading Commission, which regulates futures markets, that he wants the agency to analyze the proposals within 30 days.

Futures exchanges have been under fire since it was disclosed in January that the FBI led a two-year undercover probe into alleged illegal trading at the Chicago Board of Trade and the Chicago Mercantile Exchange.

Leahy’s committee is responsible for drafting legislation to renew the CFTC’s authority to operate. The agency’s powers are to expire later this year. The senator said he would hold up the CFTC bill until he learns more about the FBI investigation.

Leahy told Gramm at a committee hearing that the reform proposals include requiring the futures exchanges to keep closer track of trades. Currently, trades must be timed to the nearest minute, but some critics have said the one-minute time frame gives traders a window of opportunity to cheat.

The senator said his panel was considering giving the CFTC the power to fine a broker up to three times the amount of any monetary gain resulting from an illegal trade.

Gramm was also asked to consider whether “dual trading,” which allows brokers to trade for both their own and others’ accounts, should be curtailed.