Wall Street, the underdog in a turf battle with the futures industry over control of a new type of financial product, hopes hearings this week persuade enough senators to support its position.
Treasury Secretary Nicholas F. Brady will testify Thursday before the Senate Banking Committee on the Bush Administration's proposal to transfer the stock-index contracts to the Securities and Exchange Commission.
"If we get a strong measure of support out of Senate Banking, we could move for a vote in 10 days," said Joseph Hardiman, president of the National Assn. of Securities Dealers.
Brady will become the highest-ranking member of the Administration to go on record as pressing for passage of legislation to strip stock-index futures from the Commodity Futures Trading Commission. Stock-index futures, contracts based on baskets of stocks, are popular in program trading strategies.
Testifying a day ahead of Brady in support of the proposal will be American Stock Exchange Chairman Jim Jones and Options Clearing Corp. Chairman Wayne Luthringshausen.
Supporters of the measure need the boost.
"They have a very big lead to overcome," said SEC Commissioner Mary Schapiro.
Commodities groups have lobbied for four months against any move that would diminish CFTC powers to regulate the futures markets--and with success.
"If it came to a vote today, I think it would be defeated," Bill Seale, president of the National Assn. of Futures Traders, said of the measure.
The commodities industry has been chafing for a Senate vote since introduction of the legislation in early June. Efforts so far have been blocked. And the commodities industry is blaming the Bush Administration.
"Brady is stalling for time. He doesn't have the votes yet," said Alan Sobba of the National Cattlemen's Assn.
Hardiman conceded that the securities industry needs more time to educate senators on the arcane issue of stock-index futures. Work in the House has not even begun.
The securities industry argues that all equity products form one economic market. Thus, it contends, there should be one regulatory agency that can harmonize the interaction of futures and cash markets.
The industry says split jurisdiction can lead to dangerous market volatility, such as occurred in the plunges of October, 1987, and October, 1989. The plunges scare away the average investor, it maintains.
CFTC supporters respond that a change in the regulatory structure could stifle innovation. It adds that the CFTC is best-qualified to regulate all types of futures products because it understands their unique workings.