Mon, Apr 23, 2018
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 - Sequoia takes Facebook stake as shares slide in data controversy, $1.4b hedge fund sees intact fundamentals for Facebook, Jim Cramer reveals some 'suggested hedge fund trades' amid the Trump tariffs[more]

    Sequoia takes Facebook stake as shares slide in data controversy From Bloomberg.com: The $4.2 billion Sequoia Fund bought a small position in Facebook Inc. as the stock slid late in the first quarter, investment manager Ruane, Cunniff & Goldfarb told clients. "The recent controversy enab

  2. Activist Investors - Blue Sky-owned Wild Breads faces uncertain future[more]

    From AFR.com: A Blue Sky private equity investment in artisan-style baker Wild Breads enjoyed multiple valuation upgrades despite losing millions and breaching its lending covenants, accounts lodged with the regulator last week show. Wild Breads lost $2.4 million in 2017, but Blue Sky ascribed a hig

  3. Opalesque Exclusive: Barnegat to close hedge fund to outside investors on weak opportunities[more]

    Komfie Manalo, Opalesque Asia: Bob Treue's Barnegat Fund Management said it is closing its $666m fixed income relative value hedge fund to outside investors. "The negative side to gains in Fixed Income Arbitrage is that unless we find new opportunit

  4. Investing - Hedge fund makes a big bet on malls, British hedge fund manager Odey short UK government bonds on QE bet[more]

    Hedge fund makes a big bet on malls From Barrons.com: The dominant narrative on American shopping malls is that they're dead. Crushed by Amazon.com, many brick-and-mortar retail stores are destined for bankruptcy. And where is the most retail, clustered all together? Malls. From a

  5. Performance - Hedge funds suffer first back-to-back loss in two years, Netflix performance burns hedge fund short sellers, Macro hedge fund up 14.5% in first quarter sees dollar falling, Renaissance Technologies rebounds across hedge funds in March[more]

    Hedge funds suffer first back-to-back loss in two years From Bloomberg.com: Hedge Fund returns sank for a second straight month in March, the first back-to-back loss since the first two months of 2016, as trade wars, tech-sector woes and a Fed rate hike dragged down the S&P 500 from its