American Board of Trade, Inc. v. Bagley

402 F. Supp. 974 (1975)

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American Board of Trade, Inc. v. Bagley

United States District Court for the Southern District of New York
402 F. Supp. 974 (1975)

  • Written by Brett Stavin, JD

Facts

The statute creating the Commodity Futures Trading Commission (CFTC) (defendant) went into effect on April 21, 1975. However, the individual commissioners of the CFTC were not appointed and confirmed until April 10, 1975. Because the commissioners had insufficient time to review applications prior to the effective date, Congress allowed the CFTC to provisionally designate boards of trade for the initial 90-day period following the effective date. The CFTC adopted a regulation for provisional designation, which required that applicants demonstrate that they were actually operating as a board of trade as of April 15, 1975. American Board of Trade, Inc. (ABT) (plaintiff) filed an application for provisional designation on April 18. The next day, the CFTC denied the application on the basis that it could not determine whether ABT was a board of trade. The CFTC considered ABT’s lack of an exchange floor, its unique business practices, and its apparent near-total control by one man (Arthur Economou) and his wife. On May 7, ABT provided further information to support its application, but the information was found insufficient. On May 20, the CFTC requested an on-site inspection, but ABT resisted the request. The CFTC once again denied ABT’s application on May 22, citing the additional concern of the need for a board of trade to have transaction prices that were competitively priced. The chairman of the CFTC specifically stated that an on-site inspection would be necessary to determine whether ABT was a board of trade. On July 18, the CFTC’s provisional designation authority expired, but ABT’s application continued as one for permanent designation. By that time, the CFTC was processing nine board-of-trade applications and 18,000 individual applications for merchants, brokers, operators, and advisors. ABT’s application became a second priority. ABT filed a complaint in federal district court seeking designation as a contract market.

Rule of Law

Issue

Holding and Reasoning (Werker, J.)

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