Chicago Futures Markets:

Selecting Agricultural Futures Delivery Points Involves Trade-offs

GGD-91-84: Published: Jun 4, 1991. Publicly Released: Jun 4, 1991.

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Pursuant to a congressional request, GAO provided information about the selection of delivery points for grain and soybean futures contracts traded at the Chicago Board of Trade (CBT), focusing on the: (1) trade-offs between the economic purposes and antimanipulation goals of the Commodity Exchange Act in selecting delivery points; (2) differences between CBT and Commodity Futures Trading Commission's (CFTC) priorities regarding those goals; (3) issues regarding the continued suitability of Chicago as a primary delivery point; and (4) usefulness of current research in selecting delivery points.

GAO found that: (1) delivery points had a critical role in meeting both the Commodity Exchange Act's economic purposes and antimanipulation goals, and decisions regarding delivery points involved trade-offs; (2) CBT placed a higher priority on achieving the act's economic purposes, and believed that changing delivery point features would interfere with the economic purposes of futures trading; (3) CBT believed that the act overemphasized manipulation and should be amended to require that delivery point selection foster price discovery and hedging and discourage manipulation; (4) CFTC emphasized the antimanipulation goal over the economic purposes of futures trading; (5) CFTC encouraged CBT to select delivery points that prevented manipulation; (6) CFTC believed that the act appropriately placed an emphasis on economic purposes versus antimanipulation goals; (7) although Chicago's role in the grain and soybean cash markets has declined, it may still be the best primary delivery point, since it is a major transportation center close to production and processing centers, has ready access to export channels, and has a large storage capacity; and (8) current research on delivery point issues supports the need for CBT and CFTC to assess alternatives for improving how delivery points for futures contracts meet the act's economic purposes and antimanipulation goals.