Speculation Limits Judge Says He’s ‘Skeptical’ of CFTC Rule
U.S. Commodity Futures Trading Commission arguments in support of the agency’s limits on speculation are being questioned by the judge presiding over a challenge to the rule by two Wall Street groups.
“I’m kind of skeptical about their position of Congress mandating position limits,” U.S. District Judge Robert Wilkins said during a hearing in Washington today.
The International Swaps and Derivatives Association Inc. and the Securities Industry and Financial Markets Association urged Wilkins to put the rule on hold while he considers their legal challenge. They argued financial firms including Barclays Plc and JPMorgan Chase & Co. (JPM) are losing millions of dollars preparing for a regulation that is likely to be found to overturned.
The groups argue that the CFTC never studied whether the regulation was “necessary and appropriate” or quantified the costs tied to implementing the rule.
“This is not a country where we look at tens of millions of dollars in direct costs and the entire restructuring of an industry and say that’s not irreparable harm,” Eugene Scalia, a lawyer for the groups, told the judge.
The groups, in one of the financial industry’s highest- profile efforts to weaken 2010’s Dodd-Frank law, filed lawsuits in two federal courts in Washington in December challenging the rule setting caps on the number of contracts a trader can have.
Jonathan Marcus, a lawyer for the CFTC, said the harm some of the groups’ members claim they’ve incurred seeking to comply are “miniscule” when compared to the companies’ annual revenue and income.
Wilkins said he will take the matter “under advisement” and issue a ruling “quickly.”
The rule is among the most controversial provisions of Dodd-Frank, and spurred more than 13,000 public comments to the CFTC from supporters including Delta Air Lines Inc. (DAL) and opponents such as Barclays. The agency voted 3-2 at an Oct. 18 meeting to approve the final regulation, with Jill E. Sommers and Scott O’Malia, both Republicans, voting in opposition.
The case is International Swaps and Derivatives Association v. U.S. Commodity Futures Trading Commission, 11-02146, U.S. District Court, District of Columbia (Washington).
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