SEC Official Downplays Merger With Futures Panel


One of the nation's top securities regulators threw a dash of cold water Saturday on the idea of merging his agency with futures regulators, although their jurisdictions increasingly overlap.

In an address before a financial conference, Securities and Exchange Commissioner Richard Roberts called the idea of merging the SEC with the much smaller Commodity Futures Trading Commission "very attractive." But he said he does not believe that current congressional efforts to bring it about will be taken seriously this year.

"There are significant long-term savings," he said, but a merger would create an "administrative nightmare for a year or two as we try to merge different regulatory cultures."

He and Mary L. Schapiro, the commission chairwoman, told conference participants that a greater problem is how to regulate the burgeoning market for derivatives that are not traded on any exchange. Derivatives are financial instruments whose value is based on the value of an underlying security, commodity or market index.

They include futures and options traded on regulated exchanges as well as more exotic, customized deals in which price and performance cannot be easily guaranteed. These so-called over-the-counter derivatives contributed to the $1.7-billion investment disaster in Orange County, which the SEC is investigating.

Over-the-counter derivatives remain virtually unregulated, Schapiro said. But she added that she thought it highly unlikely that a merger of the two agencies alone would bridge the gap between government oversight of the derivatives market and the regulated exchanges.

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