The CFTC has petitioned a federal appeals court in Washington D.C. to dismiss a complaint filed by the Securities Industry and Financial Markets Association (“SIFMA”) and the International Swaps and Derivatives Association (“ISDA”), two influential financial services groups. The CFTC contends that the suit must be filed and heard in a district court before moving into an appeals court. The original SIFMA/ISDA suit challenges the CFTC’s position limits rule on the grounds that it does not adequately fulfill the agency’s obligation to fully weigh the costs and benefits of new regulation.
The position limits rule, which was approved by a narrow 3-2 vote in October of last year, imposes restrictions on 28 physical commodity futures and swaps and all economically equivalent contracts. The spot-month position limits are set at 25% of deliverable supply, while non-spot-moth position limits are set using a ratio specified by the CFTC. If the rule survives this legal challenge, it will go into effect this year.
The lawsuit relies on a loophole in the Dodd-Frank Act first discovered by the U.S. Chamber of Commerce. The Chamber argued that the SEC did not thoroughly weigh the costs of an earlier corporate governance rule, and a D.C. court obligingly struck the rule down. ISDA filed its suit in the same circuit before a district and an appeals court. In response to the CFTC motion to have the case before the appeals court dismissed, ISDA and SIFMA said they did not mind putting the appeals case on hold while the district court hears the suit.