By Christopher Doering and Roberta Rampton

WASHINGTON, Feb 17 (Reuters) – Buried deep in the proposal to set position limits on oil and gas futures is a possible “landmine” that could force the industry’s biggest traders to make a stark choice: Keep your hedging exemptions, or keep your speculative book. But you can’t keep both.

Weeks after the Commodity Futures Trading Commission

unveiled its long-awaited proposal to prevent concentration in energy markets, industry executives have zeroed in on a little-noticed clause that would force big players to exit speculative trading positions if they wrest an exemption from

regulatory limits on their hedging operations.

That could be a big blow to traders at the likes of oil giant BP Plc or Swiss trading house Vitol,

who regularly use futures contracts both to protect themselves from risks on physical market positions and to make bets on prices.

And it could be wrenching for swaps dealers, such as

Goldman Sachs or Morgan Stanley. Large dealers

may need to back away from some swaps business to avoid hitting the limit, spawning new players that customers fear will add costs and risk.