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The issue of insider trading in futures markets came up for debate in Washington Wednesday, as regulators wondered how best to detect it and some in the industry uncertain whether it exists at all.

Bart Chilton, a commissioner for the Commodity Futures Trading Commission, asked exchange operators for their thoughts on whether derivatives markets could be unfairly gamed by investors trading on non-public information, admitting that he himself didn't know the answer.

Jonathan Short, general counsel for Atlanta-based IntercontinentalExchange Inc. (ICE), said an insider trading regime probably wouldn't work for commodity futures, highlighting key differences between futures and securities markets.

"[Commodities] are primarily risk management markets, with people seeking to hedge price risks," said Short, testifying Wednesday before a joint hearing of the CFTC and the Securities and Exchange Commission.

ICE, together with Chicago-based CME Group Inc. (CME), facilitates nearly all on-exchange trade in energy and agricultural commodities; the exchanges are facing pressure from the CFTC, which is considering tougher position limits for speculative investors.

The CFTC and the SEC on Wednesday held the first in a series of hearings seeking industry input on how the two regulators can better coordinate supervisory efforts, eliminate gaps in oversight and minimize turf battles.

While the SEC has tough rules to catch insider trading, the CFTC's oversight is looser, as commodities markets move on information from a wide variety of sources and there is no company issuing shares in gold, or oil.

However, the majority of futures contracts traded nowadays are financial futures, a market where the possibility of insider trading could be a concern, according to Short.

Chicago Board Options Exchange Chief Executive William Brodsky, who also testified Wednesday, noted past instances of inside information coming out of the Treasury Department, raising the possibility of insider trading in Treasury futures markets.

"You shouldn't have a strict standard in one area and zero standard in another," said Brodsky. "Let's talk about it product by product."

Chicago-based CME controls nearly all Treasury futures trade, along with the majority of U.S. equity index futures activity, and Chief Executive Craig Donohue said applying insider trading rules designed for securities is not realistic.

"If you're a mutual fund or insurance company that has a large portfolio of S&P 500 stocks, should you have to expose to the market what your long-term intentions are before [you] affect hedging or portfolio margining strategies in the equity derivatives market?" asked Donohue, who also appeared on the panel Wednesday.

SEC and CFTC officials plan to hold another round of hearings on regulatory harmonization Thursday. The agencies are due to submit a report to the Obama administration by Sept. 30, detailing how they can work more closely together.

-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@dowjones.com