The deal between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) removes a major obstacle to a congressional effort to overhaul US futures laws.

Apart from allowing the trading of single-stock futures, the legislation would also keep privately negotiated, or over the counter (OTC), derivatives free of government oversight and restructure the regulation of traditional futures exchanges. "This agreement should make it possible for Congress to enact legislation that will maintain the competitiveness of American financial markets, reduce systemic risk, and create much needed legal certainty for the over the counter derivatives market," Treasury Secretary Lawrence Summers said in a statement.

The effort enjoys broad support amid fears that outdated regulations are hurting US competitiveness in the lucrative global derivatives business. However, even with the major dispute resolved, its chances of passage in the short time left in the current congressional session remain unclear. After months of negotiations, and under intense pressure from lawmakers, the SEC and CFTC agreed to jointly regulate single-stock futures, which could be traded by both stock and futures brokers, on both stock and futures exchanges, one year after the legislation was passed. Futures exchanges have pushed to list the products as a way to bring in new business but were opposed by their securities counterparts, who expressed fears about investor protection and unfair competition with stock options.

To address those concerns, the agreement provides that single-stock futures fall under the strict customer-protection provisions of US securities laws and that margin levels on the products could not undercut comparable options margins. The tax treatment of stock options and futures would be required to be equalised by the end of 2004, or trading in single-stock futures would have to cease.

While both agencies would have enforcement and examination authority, the CFTC would be the lead regulator for futures exchanges and brokers and the SEC for their securities counterparts. The agencies will consult each other when taking enforcement actions in the area of single-stock futures. The broader legislation has already cleared the House of Representatives Agriculture, Banking and Commerce committees - albeit in widely different forms - as well as the Senate Agriculture Committee.

In a letter to House Speaker Dennis Hastert on Thursday,Summers, Federal Reserve Chairman Alan Greenspan and the heads of the SEC and CFTC urged Congress to incorporate the agreement into the legislation and "move expeditiously" to pass it.

Key lawmakers remained guardedly optimistic. "I am confident that this agreement will increase the likelihood that Congress passes" the overhaul, Senate Agriculture Committee Chairman Dick Lugar said in a statement.