Financial Regulatory Forum

Cost-benefit lawsuits snarl Dodd-Frank implementation

By Nick Paraskeva

NEW YORK/WASHINGTON, (Thomson Reuters Accelus) – A financial industry lawsuit seeking to block new U.S. rules on commodity position limits on the grounds that they lack an adequate cost-benefit analysis could cause regulators to slow their implementation of the Dodd-Frank financial regulatory overhaul and be an indicator of more such challenges. Meanwhile, the Obama administration is saying it will resist efforts to block the law.  (more…)

ANALYSIS-CFTC speculation limits may pass quietly, unchanged

U.S. Commodity Futures Trading Commission Chairman Gary GenslerBy Christopher Doering

WASHINGTON, Dec 17 (Reuters) – New U.S. rules to limit speculation in commodity markets could move forward quickly, and with few alterations, after objections by the measure’s most vocal supporter unexpectedly delayed a key vote.

Gary Gensler, head of the U.S. Commodity Futures Trading Commission, abruptly postponed a vote on Thursday to open proposed new position limits to public comment, evidence of mounting pressures internally as the agency implements dozens of rules meant to make markets safer and more transparent.

The agency must carefully balance the laws it is required to implement as part of the sweeping Dodd-Frank financial overhaul with the opinions of its five commissioners, who disagree on how they should get there.

COLUMN-Cocoa’s rise and fall puts spotlight on FSA: John Kemp

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

By John Kemp

LONDON, Sept 15 (Reuters) – Cocoa’s stunning rally and equally spectacular bust over the last five months provides compelling evidence that large positions, especially in contracts close to delivery, influence futures prices, and that regulators should develop effective position limits to ensure market prices reflect supply-demand fundamentals and not the impact of dominant positions.

Britain’s Financial Services Authority (FSA), which regulates commodity markets, continues to insist there is no evidence large positions, either singly or collectively, influence futures prices, most recently in a position paper published in December 2009 (

COLUMN-Is the argument from liquidity a fallacy? John Kemp

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

By John Kemp

LONDON, June 29 (Reuters) – What is the “right” level of speculative activity in commodity markets? Different people reach different conclusions, explaining the fierce debate over position limits and other attempts to impose stricter regulation that has broken out since the price spike in 2008.

Economists and market practitioners are divided about the impact of increased participation by investors and speculators over the last decade. Some claim it has improved price discovery and facilitated more hedging. Others blame it for raising volatility, swamping fundamentals and inflating bubbles.

COLUMN-Gensler on brink of position-limits victory: John Kemp

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

By John Kemp

LONDON, June 25 (Reuters) – U.S. Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler appears to be on verge of achieving a big victory in his battle to impose stricter position limits on major energy futures contracts.

Back in January, Gensler unveiled proposals for tough new limits on futures positions in U.S. crude, natural gas, gasoline and heating oil. Unlike previous limits set by exchanges, these would be set by the Commission itself and would aggregate all positions in economically equivalent futures and options for a particular commodity.

COLUMN-Consolidated analysis of oil positions needed: John Kemp

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

By John Kemp

LONDON, May 25 (Reuters) – The standard analysis of speculators’ positions in crude oil markets is highly misleading. By focusing only on futures and options positions in physically-settled NYMEX light sweet oil it ignores important and financially equivalent positions in other WTI-linked derivatives as well as positions on the rival ICE market in London.

The anomaly has been thrown into stark relief by proposals published by the Commodity Futures Trading Commission (CFTC) earlier this year that would start applying position limits for referenced energy contracts on an aggregated basis across similar commodities.

COLUMN-Pending U.S. bill clears way for CFTC limits vote: John Kemp

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

By John Kemp

LONDON, May 24 (Reuters) – With Congress poised to enact sweeping financial reforms next month, attention will switch back to the Commodity Futures Trading Commission (CFTC) proposals to impose tougher position limits on major energy contracts.

The Commission voted in January to put its proposals out for a major 90-day consultation exercise, which ended in late April. Staff are wading through almost 8,000 written comments. The Commission will then have to decide whether and how to reshape the proposal in the light of comments received, before putting it to a final vote.

PREVIEW – Odds stacked against CFTC metals position limits

By Frank Tang and Christopher Doering

NEW YORK/WASHINGTON, March 23 (Reuters) – The top U.S. futures regulator, which has struggled to gain support for a plan to curb concentration in energy markets, could face even tougher resistance on Thursday as it considers whether similar provisions are needed for metals.

The Commodity Futures Trading Commission will hold a day-long hearing to determine whether it needs to write a rule to create speculative position limits for gold, silver and copper markets to prevent price manipulation.

Commissioners will hear from metals markets players who oppose position limits and are expected to argue that limits will drive trade to unregulated or overseas markets.

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.

ANALYSIS-Big traders face ‘landmine’ in CFTC energy rule

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,