Commodities Controlled

It is my belief that exchanges for dealing in securities and commodities are necessary and of definite value to our commercial and agricultural life. Nevertheless, it should be our national policy to restrict, so jar as possible, the use of these exchanges for purely speculative operations. --Franklin D. Roosevelt in a message to Congress, 1934.

Congress moved swiftly toward Federal regulation of the nation's stockmarkets, handing the President the Securities Exchange Act of 1934 a few months after he asked for it. Largely because grain markets were already regulated to some extent, the commodity measure was put off until 1935, then until 1936. Last week President Roosevelt finally squiggled his name to a series of amendments converting the old Grain Futures Act into the Commodity Exchange Act. It was supposed to do for commodity markets what the Securities Exchange Act had done for stockmarkets. Actually, it did no such thing.

The Commodity Exchange Commission set up by the Act bears little resemblance to the Securities & Exchange Commission. It is merely the old Grain Futures Administration under a new name, members being the Secretary of Agriculture, the Secretary of Commerce and the Attorney General. Its purview was broadened from grains, sorghums and flax to include rice, mill feeds, butter, eggs, potatoes and, more important, cotton. But entirely ignored by the Act were such commodities as coffee, sugar, cocoa, rubber, silk, tin, hides.

In its restricted field of domestic farm staples, however, the Commodity Act hews closer to the general line of securities regulation. Trading sins include manipulation, wash sales, dealing in options, bucketshop operations and routine fraud. Customers have to put up actual margins, something of an innovation for big speculators whose credit is good. One customer's funds may not be used to support another customer's accounts. Floor brokers and commission merchants with a futures business have to register with the Commission. Among the Commission's wide discretionary powers are the right to delay or advance contract settlements to prevent month-end squeezes, and the right to fix limits on the amount of trading by any one person except in legitimate hedging operations.

To lessen the problem of proving that a person "is violating" the law, past tenses were belatedly inserted in the old Act. It was on that technicality that the courts tossed out the Government's case against Speculator Arthur Cutten.

Signing of the measure last week passed unnoticed by the commodity markets affected. Indeed, cotton went above 12-c- per Ib. for the first time since last January; wheat closed the week with a 6-c- gain at 94-c- per bu. President Robert P. Boylan of the Chicago Board of Trade diplomatically announced: "Directors of the Board of Trade have no reason to anticipate other than a fair and reasonable administration of the Act."

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