Are Position Limits Dead?

Now that a U.S. District Court Judge has sent the CFTC’s position limits rule back to the drawing board, it remains to be seen whether regulators possess the willpower to keep it alive.

Five years into the development of the rule, which would put caps on speculative bets tied to nearly 30 different commodities, the CFTC faces significant hurdles going forward.

The CFTC now has 60 days to challenge the court’s ruling. And as Reuters reports, the financial industry, especially the International Stocks and Derivatives Association, is newly emboldened and will certainly challenge any appeal. Even if the CFTC does appeal the ruling, position limits regulation may still be killed on the basis that the CFTC failed to adequately weigh the costs and benefits of the rule.

Regardless of whether the CFTC chooses to appeal the ruling or go back to the drawing board in order to prove the necessity of the rule, resuscitating position limits could take considerable time and resources.

Nevertheless, Gary Gensler, chairman of the CFTC, has vowed to push forward with position limits. Gensler has called position limits “critical” and yesterday confirmed that the regulatory body is moving forward.

“We should continue forward and get advice from our attorneys on how to do that. When judges rule, we consider what to do, we consider whether to appeal and so forth and move forward,” Gensler said.

Read more here. And here.

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