In October, 2011, the CFTC rule was blocked by Judge Robert Wilkins. “The CFTC’s error in this case was that it fundamentally misunderstood and failed to recognize the ambiguities in the statute,” Wilkins wrote in his decision. The ruling hinged on whether the CFTC had made a case that its rule was necessary and appropriate.
The rule, a mainstay of Dodd-Frank financial reform, was meant to curb speculative trading in the wake of the 2008 financial crisis.
Although it is presently unclear whether the CFTC will rewrite the rule, pursue an appeal, or both, it is clear that Gensler and Chilton have taken a more aggressive, public stance on position limits in the last week. In his statement before Congress last week, Gensler detailed the CFTCs accomplishments before outlining the agency’s upcoming calendar.
“The CFTC is seeking to consider and finalize the remaining Dodd-Frank swaps reforms this year. In addition, as Congress directed the CFTC to do, I believe it’s critical that we continue our efforts to put in place aggregate speculative position limits across futures and swaps on physical commodities,” Gensler said.
Meanwhile, in Arkansas, Bart Chilton held forth on the benefits of market functionality and position limits:
So, what’s to be done? How do we ensure that these 150-year-old-plus markets keep working for you? Well, Congress and President Obama told us to put in place what are called speculative position limits as part of the financial reform law in 2010—Dodd-Frank. So far, however, they’re not in place in large part because the largest speculators on the planet are gripping position limits like Charlton Heston’s gun. They’ve tried to kill them on Capitol Hill when the bill was considered. They tried to defund them. They tried to mute them through the rulemaking process, and now they are trying to litigate them to death.
Chilton then used the example of the ever increasing price of gas to further elaborate his point on position limits:
Today, energy costs for most families have risen more than 20 percent since 2001. This hurts not only American households, but also American business—like many of your businesses—that rely on energy. According to the Energy Information Administration (EIA), nearly nine percent of our economy or $1.4 trillion is spent on energy annually. Imagine if that figure dropped by just ten percent—$140 billion freed up for investment and economic growth.
So that’s why I continue to lead the charge for position limits—to help keep the markets working for you. The efforts to stop position limits will ultimately fail. Congress told us in no uncertain terms to get it done, and I intend to see that we do that, before more families and businesses go into the “red” column on their balance sheets.