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Trading Spaces? Will CFTC Move Into FERC's House?

Will the CFTC move Into FERC's house?
Fortnightly Magazine - January 2004

among agencies.

The CFTC: The Agency That Might Be King

The CFTC, which began life as the Grain Futures Administration within the Department of Agriculture in 1922, morphed into the Commodity Exchange Authority when Congress passed the first Commodity Exchange Act in 1936. At that time its authority was expanded to cover trading not only in grain, but also in cotton and several other specified agricultural commodities, but the authority remained within the Department of Agriculture. In 1968 its coverage was expanded to include livestock, livestock products and frozen concentrated orange juice.

In 1974, however, the CEA was substantially overhauled, and the CFTC was created as an independent agency. The Senate Committee on Agriculture and Forestry noted that:

"[A] person trading in one of the currently unregulated futures markets should receive the same protection afforded to those trading in the regulated markets. Whether a commodity is grown or mined, or whether it is produced in the United States or outside, makes little difference to those in this country who buy, sell, and process the commodity, or to the U.S. consumers whose prices are affected by the futures market in that commodity." S. Rep. No. 93-1131, 1974 U.S.C.C.A.N. at 5859.

The 1974 Amendments granted the CFTC exclusive jurisdiction over a fair number of possible transactions involving commodities. 5 CEA section 2(a)(1)(A) now provides [emphasis supplied]:

"(A) In General.-The Commission shall have exclusive jurisdiction … with respect to accounts, agreements, … and transactions involving contracts of sale of a commodity for future delivery, traded or executed on a contract market designated … or any other board of trade, exchange, or market.… Except as hereinabove provided, nothing contained in this section shall (I) supersede or limit the jurisdiction at any time conferred on the Securities and Exchange Commission or other regulatory authorities under the laws of the United States or of any State, or (II) restrict the Securities and Exchange Commission and such other authorities from carrying out their duties and responsibilities in accordance with such laws. Nothing in this section shall supersede or limit the jurisdiction conferred on courts of the United States or any State."

In short, the first sentence appears to provide the CFTC exclusive jurisdiction over agreements and transactions involving contracts of sale of a commodity for future delivery, traded, or executed on a contract market or any other board of trade, exchange or market. The second sentence (much of the CEA is not well written) saves the jurisdiction of other agencies "except as hereinabove provided" in the first sentence. Since the first sentence gives the CFTC exclusive jurisdiction, it is not clear what is preserved in the second sentence. Some attention has been given to the fact that the SEC regulates securities under the Securities Exchange Act of 1934. 6 There is a more real savings clause for the SEC and the securities products it regulates elsewhere in the CEA, but none for other agencies, aside from financial products regulated by the various federal banking authorities. So unless electricity or natural gas are excepted elsewhere, there is a real question