Onion Futures Act

The Onion Futures Act is a United States law banning the trading of futures contracts on onions as well as "motion picture box office receipts". In 1955, two onion traders, Sam Siegel and Vincent Kosuga, cornered the onion futures market on the Chicago Mercantile Exchange. The resulting regulatory actions led to the passing of the act on August 28, 1958. , it remains in effect. The law was amended in 2010 to add motion picture box office futures to the list of banned futures contracts, in response to lobbying efforts by the Motion Picture Association of America. Onion futures trading began on the Chicago Mercantile Exchange in the mid-1940s as an attempt to replace the income lost when the butter futures contract ceased. By the mid-1950s, onion futures contracts were the most traded product on the Chicago Mercantile Exchange. In 1955, they accounted for 20% of its trades. In the fall of 1955, Siegel and Kosuga bought so many onions and onion futures that they controlled 98% of the available onions in Chicago. Millions of pounds (thousands of tonnes) of onions were shipped to Chicago to cover their purchases. By late 1955, they had stored of onions in Chicago. They soon changed course and convinced onion growers to begin purchasing their inventory by threatening to flood the market with onions if they did not. Siegel and Kosuga told the growers that they would hold the rest of their inventory in order to support the price of onions. As the growers began buying onions, Siegel and Kosuga accumulated short positions on a large number of onion contracts. They also arranged to have their stores of onions reconditioned because they had started to spoil. They shipped them outside of Chicago to have them cleaned and then repackaged and re-shipped back to Chicago. The "new" shipments of onions caused many futures traders to think that there was an excess of onions and further drove down onion prices in Chicago. By the end of the onion season in March 1956, Siegel and Kosuga had flooded the markets with their onions and driven the price of of onions down to 10 cents a bag.