The Chicago Wheat Futures Market: Recent Problems in Historical Perspective

Abstract

In March of 1979 the Commodity Futures Trading Commission (CFTC) ordered trading terminated in the expiring March wheat futures contract at Chicago, which had three trading days remaining. The CFTC has authority, under the 1974 Act, "to direct the contract market to take such action as, in the Commission's judgment, is necessary to maintain or restore orderly trading in, or liquidation of, any futures contract .... whenever it has reason to believe that an emergency exists" (CFTC, 1976). The Chicago Board of Trade obtained an injunction against the CFTC order, allowing the March contract to trade out, and providing at least transitory comfort to those who feared that this unprecedented intervebtion might establish a precedent. The court, in granting the injunction, said "this is a case where a government agency has overreached itself. It has been called upon to justify its actions, and instead of attempting to do so has chosen to stand behind a rule of law which ... it misconceives" (Board of Trade, 1979). But the Appeals Court subsequently ruled (upheld by the Supreme Court) that the CFTC order was not subject to judicial review. The CFTC had presented a list of seven market factors upon which the order had been based (CFTC, 1979a);