[Congressional Record Volume 143, Number 19 (Thursday, February 13, 1997)]
[Senate]
[Page S1413]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 ENHANCING THE COMPETITIVENESS OF CHICAGO FUTURES EXCHANGES: IMPORTANT 
                        FOR ILLINOIS AND AMERICA

 Ms. MOSELEY-BRAUN. Mr. President, the Monday, February 10, 
1997, Chicago Tribune contained an editorial entitled: ``Nurturing 
Chicago's Exchanges.'' The editorial, talking about the Chicago Board 
of Trade, the Chicago Mercantile Exchange, and the Chicago Board of 
Options Exchange, made the point that:

     the Chicago exchanges' global market share in future and 
     options plunged from 60 percent in 1987 to 31 percent in 
     1995. The business is going overseas, where regulatory costs 
     are lower, and off exchanges, where banks and other companies 
     can engineer innovative contracts in a day or two without 
     government approval.

  The Tribune had it exactly right. As in so many other areas of 
financial policy, the law has not kept up with economic reality. The 
world has changed. There is a revolution underway in finance, and, if 
the United States sits back and ignores the new realities of the 
marketplace, the result will be to seriously damage American financial 
marketplaces vis-a-vis their global competition, and to increasingly 
warp and distort the competition between and among various American 
financial markets.
  We must respond; we must respond vigorously; and we must respond now. 
Chicago's future and option exchanges are an American treasure; their 
innovations literally created this industry and are in no small part 
responsible for American leadership in finance. And the creativity of 
the Chicago exchanges has had a huge pay off for the Chicago area. As 
the Tribune editorial pointed out:

     the commodities and securities businesses have been strong 
     job machines here, accounting for 50,000 direct jobs and 
     total employment of 151,500, up 31 percent from a decade ago. 
     The industry also keeps about $35 billion in Chicago banks.

  It is imperative, therefore, that we act quickly to reauthorize the 
Commodity Futures Trading Act as quickly as possible, and that we do so 
in a way that enhances the ability of the American futures and options 
industry to meet both their less regulated competition here in the 
United States, and their evermore formidable competition abroad. I 
intend to work for quick enactment of the legislation put forward by 
the distinguished chairman of the Senate Agriculture Committee, Senator 
Lugar. I urge my colleagues to join me, and to ensure that a 
procompetitive, commonsense approach that allows the futures exchanges 
to meet and compete with all comers passes this body before the snow 
melts in Illinois.
  Mr. President, I ask that the full text of the Tribune editorial be 
printed in the Record.
  The editorial follows:

                [From the Chicago Tribune Feb. 10, 1997]

                     Nurturing Chicago's Exchanges

       The Chicago Board of Trade will soon inaugurate a new $182 
     million trading floor, which will triple its space and 
     seemingly prepare the nation's oldest futures exchange for 
     continued growth into the 21st Century.
       Instead of celebrating, however, Board of Trade honchos are 
     bemoaning their inability to compete against foreign 
     exchanges and bankers who sell customized financial products 
     in largely unregulated, off-exchange markets.
       Indeed, unless the CBOT can create innovative products and 
     lower costs to attract new customers, and unless it can get 
     fair regulatory treatment from Washington, the new floor may 
     turn out to be a monument to the past, not a springboard to 
     the future.
       CBOT leaders are confident they can invent new contracts 
     and a joint committee of the Board of Trade and the Chicago 
     Mercantile Exchange is working on cutting costs. (That group 
     should push for consolidation of the two exchanges' clearing 
     operations.)
       But Congress also needs to update the Commodity Exchange 
     Act to reflect the realities of today's financial markets. If 
     it doesn't, Chicago will quickly lose its place as the 
     world's center for managing financial risk.
       That would be a severe blow to the city. According to a 
     recent study the commodities and securities businesses have 
     been strong job machines here, accounting for 50,000 direct 
     jobs and total employment of 151,500 up 38 percent from a 
     decade ago. The industry also keeps about $35 billion in 
     Chicago banks.
       Despite all that, the Chicago exchanges' global market 
     share in futures and options plunged from 60 percent in 1987 
     to 31 percent in 1995. The business is going overseas, where 
     regulatory costs are lower, and off exchanges, where banks 
     and other companies can engineer innovative contracts in a 
     day or two without government approval. The Board of Trade 
     must wait six months to get a new contract approved.
       That and other rules were enacted years ago, when most 
     customers of the exchanges were farmers using futures to 
     hedge against swings in crop prices. Today 95 percent of the 
     trades are between large financial institutions and 
     professional investors, who are interested in efficiency, not 
     government protection.
       Senate Agriculture Committee Chairman Richard Lugar of 
     Indiana has introduced a bill to speed approval of new 
     contracts and require regulators to do cost-benefit analyses 
     before imposing new rules. It also would continue to deny 
     commodity regulators authority to oversee off-exchange 
     trades--a step the Treasury Department strongly supports.
       But Lugar's bill would give the Chicago exchanges a chance 
     to compete on an equal footing in the ``professional'' 
     markets by allowing unregulated products for institutional 
     customers to be developed while still insisting on protection 
     for small retail customers.
       It carefully balances the need to safeguard individual 
     investors with the need to free the exchanges to compete in 
     global markets. A similar House bill has been proposed by 
     Rep. Tom Ewing (R-Ill.). Congress must debate these measures, 
     reconcile and then pass them if Chicago is to have the chance 
     to preserve its global leadership in financial risk 
     management.

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