The top U.S. commodities regulator will consider today steps to curb speculation in raw materials including oil, gold and wheat as part of the most sweeping rewrite of Wall Street rules since the 1930s.
Four of five members of the Commodity Futures Trading Commission said they will vote in favor of publishing a two-part proposal to restrict the number of contracts one firm can hold. The plan, if approved after a 60-day public comment period, would limit traders to 25 percent of deliverable supply in the contract nearest to expiration, followed by an all-month ceiling of 10 percent of open interest up to the first 25,000 contracts and 2.5 percent thereafter.
The Dodd-Frank Act gave the CFTC until January to rein in speculation in the energy and metals markets and until April for agricultural commodities. Yesterday, CFTC Chairman Gary Gensler told lawmakers that the commission wouldn’t meet next month’s deadline because it doesn’t yet have sufficient data.
“At the core of our obligation is to protect market integrity,” Gensler said at the hearing today. The rule will shield the markets from excessive speculation by ensuring positions aren’t too concentrated, he said.
Gensler, along with Commissioners Bart Chilton, Scott O’Malia and Michael Dunn said they will vote today in favor of publishing the rule for comment. Dunn and O’Malia said they may not ultimately support imposing position limits. Commissioner Jill Sommers said she would vote against the rule.
‘Bad Policy’
“It’s bad policy to promulgate regulations that are not enforceable,” Sommers said, adding that the commission lacks the data needed to enforce effective caps.
Continued on Bloomberg
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