By Douwe Miedema
WASHINGTON, Feb 10 (Reuters) – A group of commodity firms
came out against a new U.S. rule to curb market speculation in a
letter on Monday, after banks successfully shot down an earlier
version of the position limits rule in court.
The new rule by the Commodity Futures Trading Commission
attracted well over 100 comment letters by industry participants
after the agency – which regulates swaps and futures – launched
it in November.
“The Commission would inevitably hurt the efficient
operations of U.S. derivatives markets,” if no changes were
made, the Commodity Markets Council said, adding that the rule
also exceeded the Congressional mandate.
The CMC is a powerful industry body whose members include
oil major BP Plc, commodity power houses Cargill Inc
and Bunge Ltd, as well as the world’s largest
future exchange, the CME Group Inc.
Position limits have long been used in agricultural markets
to curb speculation, but Congress gave the CFTC far greater
powers to impose them after the crisis. The agency will now
extend them to oil, natural gas and metals markets.
A judge knocked down an earlier version of the rule in 2012
after Wall Street challenged it in court, fearing they would
incur high costs because they needed to tally up the positions
across hundreds of subsidiaries.
The agency is now arguing the rule is needed by looking at
the manipulation of the silver market by the Hunt Brothers in
1979 and the cornering of the natural gas market by hedge fund
Amaranth in the 2000s.
The new rule had been expected to irk commodity merchants
such as Cargill looking to hedge certain transactions, which is
set to become harder if the rule stays unchanged.
Under U.S. law, the Commission needs to look at the public
comments before issuing a final rule, and adopt changes or
explain why they were not needed.
