Financial Regulatory Forum

COLUMN – U.S. futures industry risks Pyrrhic victory in battle with CFTC: Kemp

– John Kemp is a Reuters columnist. The views expressed are his own –

By John Kemp

LONDON, March 19 (Reuters) – By rejecting position limits on energy markets, and calling into question the Commodity Futures Trading Commission’s (CFTC) authority to regulate in this way, the Futures Industry Association (FIA) has dangerously escalated the conflict with its regulator and ultimately with Congress.

It is a sign of the industry’s renewed self-confidence after the crisis, as well as its visceral hostility to restrictions of any sort on position sizes, that the FIA is strenuously opposing limits most observers have described as extremely generous, and has made veiled threats that the position limits could be struck down in court.

This is a high-risk strategy. The FIA’s objections are statutory not constitutional. Even if it forces the Commission to back down, or prevails in court, it would be a relatively simple matter for Congress to amend the 1936 Commodity Exchange Act to give the CFTC more complete authority to impose and enforce the limits FIA has opposed.

SENSE OF CONGRESS

If it blocks the CFTC’s current proposals, the FIA would almost certainly face the threat of new legislation. There is a groundswell of support in Congress for giving the CFTC more power, not less, to regulate energy markets:

ANALYSIS-Deck chairs secure aboard USS Financial Regulation

By Kevin Drawbaugh

WASHINGTON, March 21 (Reuters) – The big U.S. government agencies in charge of policing banks and markets, despite being excoriated over the severe 2008-2009 financial crisis, have successfully dodged a major structural shake-up.

While Congress may yet clamp down on the financial industry from Wall Street to Main Street, a top-to-bottom overhaul of the nation’s regulatory apparatus — which seemed like a certainty a year and a half ago — is not going to happen.

As political reality has tempered reform proposals, plans to reconfigure a patchwork bureaucracy stitched together over decades have faded from view, with just one agency closure still on the negotiating table.

U.S. futures regulator wants ‘Eddie Murphy’ insider-trading ban

By Roberta Rampton and Charles Abbott

WASHINGTON, March 3 (Reuters) – The top U.S. futures regulator wants Congress to include as part of its financial regulatory reform package new securities-style firewalls and insider trading bans for commodities, the chairman of the Commodity Futures Trading Commission said on Wednesday.

The CFTC and Securities and Exchange Commission proposed the harmonized rules in October, many of which require authority from Congress. This is the first time CFTC Chairman Gary Gensler has indicated how soon he wants to begin implementing the new measures.

The CFTC is calling its insider trading ban the “Eddie Murphy rule” after the actor’s role in the movie “Trading Places,” in which traders stole an Agriculture Department report on the U.S. orange crop and then placed positions on the market.

U.S. regulator rejects CME stance on Treasury futures

By Ann Saphir

CHICAGO, Jan 26 (Reuters) – U.S. regulators rejected as “unpersuasive” CME Group Inc’s decision to bar traders from moving their Treasury futures positions to upstart exchange ELX Futures by using a block-trade mechanism offered by ELX.

Shares of the world’s largest derivatives exchange operator skidded 6.8 percent on Tuesday even as it defended its stance. CME said the Commodity Futures Trading Commission had not moved to require it to accept so-called exchange of futures for futures (EFF) trades from ELX or its members.

The CFTC has made a formal request to CME to defend its policy further, and the CME is expected to do so in coming weeks.

CFTC position limit plan will be published on Tuesday

WASHINGTON, Jan 25 (Reuters) – The U.S. Commodity Futures Trading Commission’s proposal to impose position limits on four energy futures and options contracts will published in the Federal Register on Tuesday and be open for public comment for 90 days.

The proposal, which would limit the number of contracts speculative investors could control at any one time, applies to crude oil, gasoline, heating oil and natural gas futures and options traded on the New York Mercantile Exchange and the IntercontinentalExchange.

The CFTC will review the comment letters and may modify the proposal before it votes on whether to adopt any final regulations.

FACTBOX-Profiles of CFTC commissioners on position limits

WASHINGTON, Jan 19 (Reuters) – The U.S. Commodity Futures Trading Commission last week released its long-awaited proposal to curb speculation in energy futures markets, but several of its top officials expressed reservations that could make it

harder for the regulatory agency to finalize its plan.

The measure is the first major regulatory reform for the top U.S. futures market regulator, led by Chairman Gary Gensler.

Gensler, a Democrat, is one of five CFTC commissioners appointed by the president.The commissioners have released the plan for public comment, but must vote again for the proposal to become final.

PREVIEW-U.S. cotton trade frets over volatile trading

By Rene Pastor

NEW ORLEANS, Jan 4 (Reuters) – The U.S. cotton industry remains worried about volatile trading in the futures market and is hopeful that demand is gradually recovering from the world’s worst economic downturn in 70 years, a senior official said Monday.

Mark Lange, president of the National Cotton Council, an industry group, said that a top concern of the trade in 2010 would be “continuing concerns about market volatility and confidence in the futures market.”

He spoke with Reuters at the start of the Council’s annual Beltwide Cotton Conference which runs Monday through Thursday in New Orleans.

CFTC misses deadline on position limits decision

WASHINGTON, Dec 21 (Reuters) – The U.S. futures market regulator on Monday missed a self-imposed end-of-fall deadline to decide whether to issue a proposal to limit the number of contracts investors can hold in “physical” commodities, such as crude oil.

The Commodity Futures Trading Commission said in July it was considering a clampdown on excessive speculation in energy and commodity trading by restricting holdings of big players, part of a broader move by the Obama administration to stabilize the financial markets.

CFTC Chairman Gary Gensler routinely has said the agency would make an announcement on the matter by the end of autumn, which occurred shortly after noon EST on Monday.

U.S. Senate agriculture panel head plans own US swaps reform bill

Senator Blanche Lincoln (D-AR) (C) speaks about the 2007 budget in a news conference at the Capitol in Washington, February 9, 2006. Also pictured are Senate Majority Leader Harry Reid (D-NV) (L) and Senator Kent Conrad (D-ND).   REUTERS/Jonathan Ernst WASHINGTON, Nov 18 (Reuters) – The U.S. Senate Agriculture Committee chairman said on Wednesday she intends to draft legislation “that will bring much-needed transparency and accountability to the over-the-counter derivatives market.”

(more…)

Proposed U.S. risk regulator overlaps SEC, CFTC – futures regulator Gensler

WASHINGTON, Nov 17 (Reuters) – A proposed super-regulator for the U.S. financial system could result in overlapping overseers of the securities and futures exchanges, said the chief futures regulator on Tuesday.
(more…)

  •