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CFTC v. AMERICAN BD. OF TRADE

July 13, 1979

COMMODITY FUTURES TRADING COMMISSION, Plaintiff,
v.
The AMERICAN BOARD OF TRADE, INC., Arthur N. Economou, Phyllis H. Economou, the American Board of Trade Clearing Corporation, Inc., the American Board of Trade Service Corporation, Inc., and Arthur N. Economou and Company, Inc., Defendants



The opinion of the court was delivered by: BRODERICK

MEMORANDUM ORDER

I. Introduction

 Plaintiff, the Commodity Futures Trading Commission ("the Commission"), seeks various forms of relief based on defendants' alleged violations of Sections 4c(b) and 4c(c) of the Commodity Exchange Act, as amended ("the Act"), *fn1" and Sections 32.7 and 32.11 of the regulations promulgated under the Act. *fn2" The case is now before me on the Commission's motion for a preliminary injunction.

 II. Conclusion

 For the reasons that follow, I grant the Commission's motion. *fn3" Defendants are preliminarily enjoined (a) from accepting money, securities, or property (or extending credit in lieu thereof) from any person in connection with the purchase or sale of any commodity option; (b) from soliciting and accepting orders for the purchase or sale of commodity options and from supervising persons so engaged, and (c) from refusing to produce for inspection by authorized representatives of the Commission records that Commission regulations require be kept. Defendants may continue to service accounts of existing customers in connection with commodity option transactions that were entered into prior to April 24, 1979. *fn4"

 III. Discussion

 The Commission is a duly constituted independent regulatory agency of the United States. Since April 21, 1975, the Commission has been charged with the responsibility for administering and enforcing the provisions of the Act and the regulations promulgated under the Act, including those provisions and regulations that pertain to commodity options. *fn5"

 Defendant the American Board of Trade, Inc. ("the Board"), a Delaware corporation with its principal place of business in New York City, is a membership organization that provides, Inter alia, an exchange and marketplace for certain commodity options transactions. The other defendants are corporations affiliated with the Board and Arthur N. and Phyllis H. Economou, individuals who are officers of the Board and its corporate affiliates. None of the defendants is presently registered with the Commission in any capacity. *fn6"

 A. Violations of 7 U.S.C. § 6c(b) and Regulation 32.11, and of 7 U.S.C. § 6c(c)

 The complaint alleges that defendants, by engaging in commodity option transactions, violate 7 U.S.C. § 6c(b) and Regulation 32.11, and 7 U.S.C. § 6c(c).

 7 U.S.C. § 6c(a), which is referred to in 7 U.S.C. § 6c(b), provides in pertinent part:

 
Prohibited transactions Commodities specifically listed
 
(a) It shall be unlawful for any person to offer to enter into, enter into, or confirm the execution of, any transaction involving any commodity, which is or may be used for (1) hedging any transaction in interstate commerce in such commodity or the products or byproducts thereof, or (2) determining the price basis of any such transaction in interstate commerce in such commodity, or (3) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof
 
(B) if such transaction involves any commodity specifically set forth in section 2 of this title, prior to the enactment of the Commodity Futures Trading Commission Act of 1974, and if such transaction is of the character of, or is commonly known to the trade as, an "option", . . . *fn7"
 
Thus 7 U.S.C. § 6c(a) flatly prohibits option transactions with respect to certain designated commodities, *fn8" not including those ...

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