Letter of Transmittal to the U.S. Congress

During FY 1998, the Commission focused on its continuing efforts to streamline its regulations. The Commission proposed to streamline further the contract market designation process. In the first full year of the new fast-track process for designation of certain contract markets, 19 contracts were designated under the 10-day fast-track provisions, and 19 were designated under the 45-day provisions. The Commission also approved significant rule amendments concerning bunched orders in response to exchange requests for increased flexibility. In addition, risk disclosure rules were amended to speed the opening of accounts for sophisticated investors.

Throughout the year, the Commission sought information from the public on regulatory reform. The Commission requested comments on several key areas of regulation through the publication of concept releases in the Federal Register on topics including over-the- counter derivatives, the placement of foreign board of trade computer terminals in the United States, the regulation of noncompetitive transactions executed on or subject to the rules of a contract market, and performance data and disclosure for commodity trading advisors and commodity pools.

Technology developments continue to present the Commission with regulatory challenges. During FY 1998, the Commission designated the first computer-based contract market and issued advisories on the industry's responsibility to deal with computer problems related to the Year 2000. The Commission redesigned its Internet website and improved internally the automated support for its programs.

The Commission brought and settled simultaneously a case against Sumitomo Corporation of Japan which arose out of its investigation of the copper market. The investigation was conducted in cooperation with authorities in the United Kingdom and the Japanese Government. While Sumitomo neither admitted nor denied the findings, the Commission's settlement order found that Sumitomo had manipulated the price of copper during 1995 and 1996. Sumitomo agreed to pay a civil penalty of $125 million, believed to be the largest civil monetary penalty collected by a Federal agency, plus $25 million in restitution to claimants in courts in the United States. The Commission also worked with a number of international organizations on issues of regulatory coordination and established a new advisory committee on global markets.

The Commission and the CFTC staff demonstrated the commitment and diligence necessary to meet the agency's goals during FY 1998. It is with pleasure that I submit this Annual Report of the Commodity Futures Trading Commission to the U.S. Congress.

Sincerely yours,

Brooksley Born

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