John Kemp

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CFTC needs to provide more detail ….

June 2, 2009

The problem is that no one knows what Gensler means about using “aggregated position limits” to curb excessive speculation. 
At the moment the CFTC gets NYMEX data (compulsorily) and ICE data (on a “voluntary” basis).  It wants to obtain information on OTC positions as well, but would need additional legislative authority and systems to achieve it. 
The real question is what does CFTC mean by “aggregated” positions and “limits” on them: 
(1) Does aggregation stop at NYMEX+ICE, or will it extend to NYMEX+ICE+OTC?  Is CFTC prepared to include OTC contracts which are similar, but not identical, to exchange contracts (in terms of the deliverable commodity) and therefore exert an influence on exchange prices? 
(2) What does it mean by limits?  Market participants already routinely exceed the soft non-binding “position accountability levels” on NYMEX alone.  Adding in other positions on ICE and OTC will not make any difference, UNLESS the CFTC intends to harden enforcement of the non-binding accountability levels.  Is the Commission preparing to harden the limits and make them more binding? 
Gensler’s comments do not take the discussion forward unless the Commission provides some more detail on what it means.

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    "John joined Reuters in 2008 as one of its first financial columnists, specialising in commodities and energy. While his main focus is on oil markets, he has written broadly on the emergence of commodities as an asset class, regulatory issues and macroeconomic themes. Before joining Reuters, John spent seven years as a senior analyst for Sempra Commodities (now part of JP Morgan) covering base metals and crude oil. Previously, he worked as an analyst on world trade, banking and financial regulation for consultancy Oxford Analytica."
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