Word: merce
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Dates: during 1980-1989
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Although FBI agents masquerading as brokers spotted some wrongdoing in the pits where U.S. Treasury bonds and Swiss francs are traded, the bulk of the charges are directed at the Board of Trade's soybean pit and the Merc's Japanese yen pit. The yen traders have long been viewed with suspicion by other brokers, while the old clique of soybean traders had a reputation for playing by their own, traditional rules and resisting interference, even from their exchange officials. The Government has accused no fewer than 19 of the 50 soybean brokers and 21 of the 70 yen traders...
Since the federal sting was disclosed in January, the exchanges have scrambled to put their houses in order. Disciplinary actions at the Board of Trade have jumped to 119 so far this year, from 55 in the same period last year. During that time, member fines at the Merc have increased eightfold -- to $1.9 million. The day after the indictments were published, the Board of Trade announced it would initiate a $1 million upgrade in its computerized surveillance program as well as triple its minimum fines to $250,000. The Merc's chief, Leo Melamed, pledged "to put the fear...
Word of the sting prompted widespread soul-searching on the normally ebullient trading floors of the Merc and the Chicago Board of Trade. "There's paranoia in the pits today," said a futures trader. "Nobody knows just how much the feds have got and against whom." Several panicky traders who reportedly had been subpoenaed sold their exchange seats, including one on the Merc that went for only $330,500, a sharp drop from the previous sale at $380,000 only a week earlier. Many traders worried about what the scandal might cost Chicago's booming markets in terms of lost...
Originally set up more than 70 years ago to help farmers hedge their bets on the future of their crops, the Merc and the Board of Trade grew explosively during the 1980s by offering futures contracts on everything from foreign currencies to precious metals. But for all their sophisticated new financial products, the exchanges still use the old-fashioned, face-to-face auction system of making trades. The leader of the investigation, Anton Valukas, the U.S. Attorney for the Northern District of Illinois, apparently decided that the system left plenty of room for rip-offs of commodities buyers...
...index futures in Chicago can create fearsome volatility, agreed to impose restrictions when prices begin falling out of control. One safeguard will be a "shock absorber," a half an hour price floor that will go into effect on the Standard & Poor's 500 index whenever it drops on the Merc by the equivalent of about 96 points on the Dow Jones average. Under even more stormy conditions, if the Dow drops 250 points, a "circuit breaker" would halt trading for one hour on both the Big Board and in the Merc's S&P futures...