Mon, Mar 2, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Futures Industry Association files major comment letter to oppose CFTC position limit proposal

Thursday, March 18, 2010
Opalesque Industry Updates - The Futures Industry Association filed a major comment letter in opposition to the adoption by the Commodity Futures Trading Commission of its proposed speculative position limits on energy commodities.

“The FIA strongly supports the CFTC’s ongoing efforts to prevent price manipulation and to conduct effective market surveillance to protect price discovery,” said FIA President John Damgard. “Based on our analysis, the proposed rules would harm these public interests and should not be adopted.”

The FIA’s analysis cites multiple grounds for its opposition.

Congress statutorily recognized that speculators provide essential liquidity to properly functioning futures markets. The Commodity Exchange Act therefore allows the CFTC to limit speculation only when the CFTC finds those limits to be “necessary” to prevent price distortions that burden commerce. The CFTC never indicated that it found the proposal to be “necessary,” as the law requires.

In fact, the CFTC cited no evidence that speculation caused energy price distortions. The FIA’s analysis cites multiple studies that reach the conclusion that speculation did not cause artificial prices.

Adopting the proposal would hurt the public interests in price discovery, efficient hedging and preventing market manipulation. By law, the CFTC’s limits could apply only to U.S. exchange-traded futures and options; OTC and foreign futures would not be covered. The proposed limits would therefore create twin deficiencies: they would rob U.S. exchange markets of liquidity that serves price discovery and efficient hedging and they would encourage more trading in non-transparent or overseas markets outside the CFTC’s market surveillance systems.

Consideration of the proposals is premature, at best. Congress is working on legislation to revamp the CFTC’s position limit powers. The CFTC should await that legislative outcome before considering whether to impose position limits.

The proposed exemptions for hedging and swap dealers are unworkable, unduly constricting and contrary to the statute. The proposed account aggregation standard unjustifiably departs from CFTC practice and precedent.

The FIA is the leading trade organization for the futures industry. Its membership includes the world’s largest futures brokers as well as derivatives exchanges from more than 20 countries.

Source

kb

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Seth Klarman of Baupost outlines his investment process as major stock market indices are stretched, Myriad hedge fund sold bulk of its Alibaba stake last year[more]

    Seth Klarman of Baupost outlines his investment process as major stock market indices are stretched From Valuewalk.com: As hedge fund manager Seth Klarman, leader of the $28 billion Baupost Group, reviews 2014 performance and considers investors gained near 7 percent on the year, he cons

  2. Adamas Asset Management and Ping An Insurance to co-manage $500m debt fund[more]

    Komfie Manalo, Opalesque Asia: Hong Kong-based Adamas Asset Management and Ping An Insurance Group, one of China’s largest financial institutions, have finalized a memorandum of und

  3. Opalesque Exclusive: dbSelect’s top ten FX strategies average almost 10% in January[more]

    Benedicte Gravrand, Opalesque Geneva: In one of Deutsche Asset & Wealth Management (AWM)’s hedge fund platforms, called dbSelect, a number of FX Strategies did very well in January. dbSelect is a managed investment platform for unf

  4. Opalesque Exclusive: SEC’s Mark J. Flannery warns hedge funds against valuation misconduct[more]

    Komfie Manalo, Opalesque Asia: Securities and Exchange Commission chief economist and director of Division of Economic and Risk Analysis (DERA) Mark J. Flannery has warned of the risks posed by market misconduct, particularly in the true valuation of assets by hedge fund managers. In his

  5. Dymon Asia's $3bn macro hedge fund lost 10.45% in January[more]

    From Reuters.com: Dymon Asia's $3.1 billion macro hedge fund lost 10.45 percent in January, performance data seen by Reuters showed, a month where many peers lost heavily after a surprise rise in the Swiss franc. Singapore-based Dymon, set up by Danny Yong, a former founding partner and chie