Battles Are Schapiro’s Stock and Trade

Cleaning up Nasdaq is not the first formidable challenge that the 41-year-old Mary Schapiro has faced in her career as a financial markets regulator. The record of her 15-month stint as chairman of the troubled Commodity Futures Trading Commission shows that while she may not always be entirely successful, she doesn’t shy away from controversy.

At the CFTC, she encountered strong opposition for bringing major enforcement cases based on an expanded view of the agency’s authority.

The CFTC, the government agency that regulates the futures markets, has long been considered the weak sister to the Securities and Exchange Commission, which regulates stock, bond and options markets. The rough-and-tumble futures industry, with strong backing from sympathetic legislators, fiercely opposed efforts to strengthen the CFTC or combine it with the SEC.

New on the job in 1994, Schapiro promptly announced that she was going to beef up enforcement and force the futures exchanges to comply with a federal law requiring them to keep better records of trades.

In response, Thomas R. Donovan, the Chicago Board of Trade president, was quoted as saying, “I’m not going to be intimidated by some blond 5-foot, 2-inch girl.” Schapiro, annoyed, pointed out, “I’m 5 foot 5.”

Industry experts say Schapiro managed to shake up the CFTC’s enforcement operation, getting it to file some big cases meant to send a message to the industry. And she won international high marks for her intervention, just four months after taking office, in the Barings crisis, when the venerable British bank abruptly collapsed because of fraud by a young trader in Singapore.

The collapse threatened to trigger a global banking disaster. Schapiro’s round-the-clock efforts in obtaining commitments from regulators in Japan and Singapore calmed the futures markets.

But her move to expand the CFTC’s jurisdiction over derivatives--complex financial products whose value is derived from another security or index--was only partly successful. The editorial pages of the Wall Street Journal harshly criticized cases she brought against Bankers Trust and U.S. subsidiaries of the giant German company Metallgesellschaft, whose oil futures trading activity in late 1993 nearly caused the company to collapse.

“Vince Foster and I may hold the record for negative Wall Street Journal editorials,” she joked, referring to the paper’s repeated criticisms of President Clinton’s late legal advisor.

She acknowledges that she left the CFTC feeling “beleaguered,” but she denies that that had anything to do with her decision to accept the National Assn. of Securities Dealers’ offer of its chief enforcement job.