## Facts

- New York Mercantile Exchange (NYMEX) was a designated “contract market” subject to oversight under the Commodity Exchange Act (CEA), as amended in 1974.
- The 1974 amendments required contract markets to submit exchange rules to the Commodity Futures Trading Commission (CFTC) for review and approval by a statutory deadline.
- The CFTC faced a backlog of existing exchange rules and could not complete review of all rules by the deadline.
- To maintain continuity of exchange self-regulation while review was pending, the CFTC promulgated Commission Regulation 1.53.
- Regulation 1.53 required exchanges to continue enforcing their existing rules even though the CFTC had not yet completed formal approval.
- NYMEX sued in federal district court seeking declaratory and injunctive relief, arguing the CFTC’s transitional rule-approval approach (including Regulation 1.53) exceeded statutory authority and conflicted with the CEA.

## Issues

1. Whether the CEA, as amended in 1974, authorized the CFTC to require submission of exchange rules and to supervise their continued enforceability through a federal review process.
2. Whether CFTC Regulation 1.53, which preserved the effectiveness of existing exchange rules pending CFTC review, was within the CFTC’s statutory authority.
3. Whether the CFTC’s transitional regime was consistent with the structure and purposes of the 1974 amendments establishing comprehensive federal oversight of futures exchanges.

## Decision

- The court upheld the CFTC’s authority to regulate and supervise contract markets and their rules under the CEA.
- The court sustained the validity of Regulation 1.53 as a lawful interim measure pending formal review of existing exchange rules.
- The court rejected NYMEX’s request for declaratory and injunctive relief, leaving the CFTC’s regulatory approach in place.

## Legal Principles

- The CEA, as amended in 1974, grants the CFTC broad supervisory authority over designated contract markets, including authority to review, approve, disapprove, and condition exchange rules.
- An agency may adopt reasonable interim regulations to implement a new statutory regulatory scheme where immediate full administration is impracticable, so long as the interim measure preserves statutory objectives and remains subject to later substantive review.
- A statutory deadline for agency review does not necessarily foreclose transitional arrangements that maintain continuity and avoid regulatory gaps while the agency completes newly assigned responsibilities.

## Conclusion

The court held that the CFTC’s post-1974 rule-review program reflected broad statutory authority and that Regulation 1.53 permissibly maintained existing exchange rules in effect pending Commission review, consistent with Congress’s design for centralized federal oversight of futures markets.


N.Y. Mercantile Exch. v. Commodity Futures Trading Comm'n, 443 F. Supp. 326 (S.D.N.Y. 1977)