CFTC Should Resist Lobbying on Speculation Limits, Chilton Says

The U.S. Commodity Futures Trading Commission shouldn’t delay the effective date for new limits on commodity speculation, CFTC Commissioner Bart Chilton said.

Regulators should resist lobbying pressure aimed at getting them to set rules while putting off the date when they take effect, Chilton said today in speech prepared for a conference call held by Americans for Financial Reform, an advocacy organization that includes the AFL-CIO labor federation. The CFTC is facing pressure from “inside and outside the agency” to find a way around the implementation deadlines, he said.

“First, we have no such legal authority to do so,” Chilton said. “Second, that is exactly the type of dancing on the head of a legal pin Washington-speak that folks in the country are tired of -- and they should be.”

The CFTC is required under the Dodd-Frank Act to set so-called position limits in the markets for energy, metals and agricultural commodities. The agency is scheduled at a Dec. 16 meeting to consider how to set the limits, which are among the most contentious aspects of the financial-regulation law.

The role of speculators in commodities markets has been debated since 2008, when oil prices reached a record $147.27 a barrel. Dodd-Frank gives the CFTC until mid-January to impose limits on energy and metals trading, and until April to cap agricultural contracts.

CFTC Chairman Gary Gensler and fellow Democrat Chilton are scheduled to testify on position limits tomorrow at a House Agriculture subcommittee hearing. Gensler said on Dec. 9 that the CFTC may split a regulatory proposal between limits for spot month and limits for all other months combined. The agency may move “expeditiously” on the spot month proposal, he said.

Regulators could also grandfather existing swaps and start the implementation of any proposed limits as of the enactment day of the new rules, Chilton said in his prepared remarks. The CFTC could identify the largest long and short positions in the markets and require that netted futures, options and economically equivalent swap positions be below “current accountability levels” for each commodity, he said.

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