CFTC Considers Loosening Dodd-Frank Speculation Limits

The U.S. Commodity Futures Trading Commission may propose easing Dodd-Frank Act regulations limiting speculation in oil, natural gas, wheat and other commodities, according to four people briefed on the matter.

The CFTC’s five commissioners are considering a private vote to change how companies aggregate their trading positions when they have ownership stakes in other firms, according to the people, who spoke on condition of anonymity. The agency may propose raising to 50 percent from 10 percent the threshold for when a company is considered to have an ownership stake and must add the trading positions, the people said.

Steven Adamske, a CFTC spokesman, declined to comment.

The change would affect rules on so-called position limits that were completed by the CFTC in October. The limits, which cap the number of contracts a trader can have, prompted a lawsuit by the International Swaps and Derivatives Association Inc. and the Securities Industry and Financial Markets Association seeking to overturn the regulation.

The agency is considering revising its rules in response to requests from lobbying groups representing agriculture and energy firms including Cargill Inc., ConocoPhillips and Archers-Daniels-Midland Co. The proposal may still change and the meeting could also be held in public.

‘Actual Relief’

“Absent actual relief from the aggregation requirements of the position limit rules, commercial firms likely will have to significantly reorganize their existing commercial operations,” the Working Group of Commercial Energy Firms said in a Jan. 19 petition. “These actions may include the restructuring or disposition of investments in joint ventures.”

The CFTC said in its original rule that the intention was to restrict the ability of a single trader to have positions in excess of the limits because of ownership or control of multiple accounts. The speculation limits were approved on a 3-2 vote on Oct. 18 after more than a year of debate and 13,000 comment letters from supporters such as Delta Air Lines Inc. and opponents including Barclays Capital.

The rules require companies to aggregate positions when they have a 10 percent or greater ownership interest in a firm, “even though the entities trade and manage their positions independently and, as a practical matter, may not be able to access each other’s position information,” the Futures Industry Association, a Washington-based lobbying group, said in a March 26 letter to the CFTC.

The agency’s proposed change would be open to public comment before it is completed, the people said.

‘Wrong Direction’

“This change goes in the wrong direction,” Marcus Stanley, policy director for Americans for Financial Reform, a coalition including the AFL-CIO labor federation, said today in an e-mail. “The position limit rule already has serious weaknesses that could permit excessive speculation. Loosening the aggregation rules would weaken it still further.”

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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