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Felix Shipkevich October 16, 2012

CFTCs Chilton in Dallas

U.S. Commodity and Futures Trading Commission (CFTC) member Bart Chilton stated in an address on Tuesday that the CFTC should rewrite its position limits rule. The statement comes after U.S. District Court Judge Robert Wilkins struck down position limits regulation on Sept. 28 and handed a first round victory to financial industry lobbying groups.

“One rule that was supposed to go into effect that day was dealt a buzzkill by a District Court 11 days before it was to be implemented. It has been in the news some lately: speculative position limits,” Chilton said.

Chilton, CFTC vs. Lobby, Republicans

Chilton addressed the argument given by the Securities Industry and Financial Markets Association (SIFMA) and the International Swaps and Derivatives Association (ISDA) by restating that position limits are mandated by Dodd-Frank. The lobby claims that the rule is not mandated, and that the CFTC has failed to prove that position limits are necessary or economically feasible.

“Well, Dodd-Frank required that we implement limits to curtail excessive speculation that can lead to unfair prices. In fact, the law even instructed us to do so six months sooner the rest of the rules we spoke about earlier,” Chilton said.

The CFTC has been under attack from House Republicans for pursuing position limits regulation, which they deemed “ideological” and “wasteful” in a recent letter to CFTC Chairman Gary Gensler. Chilton seemed to have them in mind, along with the industry lobby, when he made the following statement:

“There were some, however, that loathed limits. They fought against them on the Hill as part of Dodd-Frank, and lost. They tried to weaken them during the rulemaking process. They were on us regulators like overeaters at a Las Vegas buffet. Then, as a last resort, they lawyered up. They sued us with what seem like inexhaustible resources and took us to court.”

Appeal or Rewrite? The CFTCs Plan.

Where will the CFTC go from here? Gensler has hinted at an appeal, the cheapest and timeliest of options, and Chilton agrees. But Chilton also stated today that the position limits rule should be rewritten so as to require multiple authorities:

“Here is why: in brief, the Court opined that the Commission could impose limits on excessive speculation in two scenarios. My thought is we state that we don’t need to use both authorities and that our previous rule was appropriate, but still go ahead and do another rule using both authorities anyway,” Chilton said.

It is now possible that the CFTC will take a two-pronged approach: appeal and rewrite.

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