Nominee as CFTC Chief Opposes SEC Merger

WASHINGTON —  President Reagan’s nominee to become chairman of the Commodity Futures Trading Commission on Wednesday delivered a strong defense of the futures industry and the independent status of the regulatory agency.

At a confirmation hearing before the Senate Agriculture Committee, Wendy Gramm said she opposed a controversial proposal to merge the CFTC and the Securities and Exchange Commission.

“I don’t think it is necessary or appropriate at this time to consider the merger of those agencies,” she said.

Some members of the House Energy and Commerce Committee, which has jurisdiction over the SEC, have said a merger would help the government prevent another stock market crash.

“I was struck by the fact futures markets worked remarkably well” last October, Gramm said.

Gramm, administrator for information and regulatory affairs at the White House budget office and wife of Sen. Phil Gramm (R-Tex.), said the CFTC should retain regulatory authority over futures and options on futures and the SEC should continue to oversee securities and options on securities.

“I think that at this point, markets need some predictability and stability, and predictability about the regulatory structure facing them,” she said.

Gramm said she was not sure a federal agency should set futures margins, which serve as performance bonds and are now established by futures exchanges.

“I question whether somebody sitting in Washington could have reacted that quickly to establish the right margins,” she said, referring to the decision by four exchanges to raise margins on stock index futures after the October crash.

Gramm said a proposal to allow a federal agency to step in and raise futures margins if they were determined to be too low was “worth considering.” But she said futures exchanges had no incentive to set margins too high or too low.

Gramm also said she was not sure what the President’s task force on the October stock market crash meant last month when it recommended “consistent” margins in stocks and futures.

“I’m not sure margins aren’t consistent now,” she said.

The presidential task force, the SEC and the New York Stock Exchange have all come out with studies urging higher futures margins to dampen price volatility and computerized program trading.

Gramm’s strong support for the existing regulatory structure appeared to hearten Senate Agriculture Committee members, who have openly questioned her commitment to defend the CFTC’s powers as well as her experience in futures.

The panel is expected to approve Gramm by a wide margin. The vote could come on Feb. 17, staff members said.