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:

EXCLUSIVE-High-frequency firms organizing lobby group

By Jonathan Spicer

NEW YORK, Dec 21 (Reuters) – About 25 high-frequency trading firms have discussed forming a lobbying group within the Futures Industry Association as they move to deal with growing scrutiny in Washington, the association told Reuters.

The firms have held a series of meetings in Chicago over the last two months, spurred by the prospect of a new transaction tax, commodity market position limits, and the possibility of a crackdown on high-frequency trading, the FIA said.

The group has a draft mission statement but no name, it said. It is unclear how many proprietary firms will ultimately join the group, which is expected to be formalized in January, according to the association.

ANALYSIS-CFTC’s expanded trader reports to add transparency

Traders work in the crude oil futures trading pit at the New York Mercantile Exchange, February 12, 2009.   By Tom Doggett and Ayesha Rascoe
WASHINGTON, Aug 19, (Reuters) – The plan by U.S. commodity regulators to provide more information on the traders doing business on futures exchanges will shine more light into the opaque markets, but will still give the often-criticized speculative investor a measure of cover. (more…)

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