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Finance Council Should Speed Up Speculation Curbs, Chilton Says

A council of U.S. financial regulators should speed up Dodd-Frank Act rules needed to limit speculation on oil, natural gas and other commodities, Bart Chilton, a member of the Commodity Futures Trading Commission said.

The CFTC and Securities and Exchange Commission, delayed in adopting regulations stemming from the 2010 financial-regulation overhaul, should consider asking the Financial Stability Oversight Council to complete the regulation defining which derivatives are swaps, Chilton said in a speech prepared for his appearance today before the Exchequer Club of Washington. The speculation limits rely on the definition.

“I realize this is a highly unusual and perhaps incendiary move, but we have a responsibility to act here, and it’s high time we do so to protect markets and consumers,” said Chilton, a Democrat who supports the speculation limits. “Perhaps given the importance of position limits and the purported hang-up, it’s time to pass the ball to FSOC.”

The council includes 10 voting members, including the heads of the Federal Reserve and Federal Deposit Insurance Corp. Treasury Secretary Timothy F. Geithner is chairman of the council.

U.S. senators introduced legislation today aimed at getting the CFTC to limit speculation they said has led to rising gasoline prices. Senators Bernie Sanders, a Vermont independent, and Ben Cardin, a Maryland Democrat, said their legislation would give the agency 14 days to implement rules to halt “excessive” oil-futures speculation.

“Oil prices are negatively impacting our entire economy,” Sanders said at a Washington news conference today. “Excessive speculation on the oil futures market is driving oil prices up.’”

13,000 Comments

The speculation limits are among the most controversial requirements in Dodd-Frank and spurred more than 13,000 comments to the CFTC from supporters such as Delta Air Lines Inc. (DAL) and opponents such as Barclays Plc (BARC)’s Barclays Capital. CFTC commissioners 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 International Swaps and Derivatives Association Inc. and Securities Industry and Financial Markets Association filed a lawsuit in December challenging the rule. The associations’ members include JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and Morgan Stanley. (MS) The groups argue that the CFTC never studied whether the regulation was “necessary and appropriate” or quantified the costs tied to implementing the rule. A judgment is pending.

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).

To contact the reporter on this story: Silla Brush in Washington at sbrush@bloomberg.net;

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net

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