Briefing Paper No. 10

Market Squabbles: SEC v. CFTC

By Charles M. Seeger
June 13, 1990

Executive Summary

Officials at the Treasury Department and the SEC contend that the low margins established by futures exchanges and the bifurcated regulatory oversight of the stock and stock index futures markets have contributed to increased volatility and reduced innovation in U.S. financial markets. But these claims misinterpret or ignore the facts. The stock market is no more volatile today than it has been historically, nor is there any evidence that lower margins in the futures markets add to volatility. Indeed, given that futures traders adjust their margin accounts daily, it can be argued that there is often less debt in the futures markets than in the stock markets. Finally, if the SEC mandates higher margins on futures markets in the United States many futures traders will flee overseas into the arms of futures markets that do not suffer from similar government intervention.

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The author is senior vice president and government counsel for the Chicago Mercantile Exchange.