FINANCIAL MARKETS : Commodities Board Proposes Trading Limits : Futures: Brokers would be restricted from dealing for their own accounts and for customers in the same session.

The Commodity Futures Trading Commission, seeking to restore confidence in the nation’s volatile futures markets, proposed limited restrictions Thursday on brokers who simultaneously trade for their own accounts as well as for their clients.

The five-member commission voted unanimously to submit the proposed restrictions to public comment over the next 90 days. If the proposed rule is not subsequently modified, the limits on dual trading would be phased in over a 12-month period.

Futures are contracts to buy or sell a specified quantity of an agricultural or financial commodity such as wheat, gold or Treasury bills at a specified price on a specified date in the future. Relatively small fluctuations in market prices can create enormous gains or losses for futures traders.

The CFTC’s proposed limits on dual trading of certain financial and agricultural futures is certain to provoke controversy in the larger futures exchanges, especially the Chicago Board of Trade and the Chicago Mercantile Exchange.

If extended to all commodity futures, the restrictions would bar brokers from trading for their own accounts as well as for their customers in the same commodities during the same trading sessions.

Critics contend that the practice of dual trading creates conflicts of interest and undermines the integrity of America’s futures markets, which have been rocked by a recent federal crackdown on fraudulent trading activity.

The CFTC’s proposed limits, however, would apply to a maximum of two commodities on the two largest exchanges and only one commodity on lesser exchanges.

In addition, the restrictions could be waived altogether if a customer wants to maintain a trading relationship with a broker he knows is trading for his own account.

The CFTC proposal was prompted by a staff study which concluded that dual trading created conflicts of interest and did not, as some brokers claimed, help keep futures markets liquid on low-volume trading days.

The November study was an outgrowth of the FBI’s three-year undercover investigation of trading on the Chicago Merc and the Board of Trade. The inquiry resulted in the indictments of 47 traders and one clerk last August.

If the CFTC’s limited restrictions are adopted, the Board of Trade and the Merc each would be required to ban dual trading in one of its two most actively traded financial commodities and one of its three most actively traded agricultural commodities for a period of 12 months.

Five lesser exchanges--the New York Mercantile Exchange, the Commodity Exchange, the Coffee, Sugar and Cocoa Exchange, the MidAmerica Commodity Exchange and the New York Cotton Exchange--each would impose the limitation on one of its most widely traded commodities.

The nation’s four remaining futures exchanges--the Kansas City Board of Trade, the Minneapolis Grain Exchange, the New York Futures Exchange and the Chicago Rice and Cotton Exchange--would be exempt from the restrictions during the trial period. All four are low-volume markets in which a single commodity accounts for virtually all activity.

The CFTC staff would compile data on how well the restrictions work and then decide whether to modify or expand the restrictions after the trial period. CFTC spokesman R. David Gary said the study could lead to an extension of the ban to all commodity futures.

“We intend to place a major emphasis on the data study,” Gary said. “At the end of the 12 months, the data should give a clear road map as to what course of action should be pursued.”

Under the proposed rules, individual or institutional customers who are aware that a given broker trades for himself but still want to work with that broker would be permitted to sign a waiver of the restriction on dual trading.

Without such a waiver, Gary said, the burden would fall on a broker trading in a restricted commodity on an affected exchange “to decide whether to trade for himself or for a customer during any trading session.”