## Facts

- The Securities and Exchange Commission (SEC) approved Chicago Board Options Exchange (CBOE) rule changes to list exchange-traded options on Government National Mortgage Association (GNMA) mortgage-backed pass-through certificates.
- GNMA certificates are government-guaranteed, mortgage-backed instruments that are transferable and widely held.
- GNMA certificates qualify as “securities” under federal securities laws and also as “commodities” under federal commodities laws, creating overlapping regulatory claims.
- The Board of Trade of the City of Chicago petitioned for judicial review seeking to set aside the SEC’s approval order.
- The Board of Trade argued that options on GNMA certificates fell within the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act (CEA), as amended by the Commodity Futures Trading Commission Act of 1974.
- The SEC and the CBOE contended that SEC authority over securities markets permitted SEC approval of GNMA options.

## Issues

1. Whether the SEC had statutory authority to approve exchange trading of options on GNMA certificates given that GNMAs are both “securities” and “commodities.”
2. Whether the CEA’s grant of “exclusive jurisdiction” to the CFTC over commodity options precluded SEC authorization of GNMA options.
3. Whether, absent affirmative CFTC action, trading in options on GNMA certificates was prohibited under the governing statutory and regulatory scheme.

## Decision

- The court granted the petition for review and set aside the SEC order approving the CBOE rule changes.
- The court held the SEC lacked independent jurisdiction to permit trading in options on GNMA certificates.
- The court held that, pending further action by the CFTC, trading in options on GNMA certificates was prohibited.

## Legal Principles

- Where Congress grants the CFTC exclusive jurisdiction over commodity options, the SEC may not authorize options trading based on general securities-law authority when the underlying instrument is also a “commodity.”
- In conflicts between a specific jurisdiction-allocation rule (exclusive CFTC authority over commodity options) and more general securities-law powers, the specific statutory allocation controls.
- For instruments classified as both securities and commodities, options trading requires clear authorization within the CFTC’s exclusive options jurisdiction; absent such action, agency gap-filling by the SEC is not permitted.

## Conclusion

The Seventh Circuit concluded that the CEA’s exclusive-jurisdiction scheme placed options on GNMA certificates within the CFTC’s control, leaving the SEC without power to approve GNMA options and barring such options trading unless and until the CFTC acted.


Bd. of Trade of Chi. v. Sec. & Exch. Comm’n, 677 F.2d 1137 (7th Cir. 1982)