CFTC Approves Position Limit Appeals (with Lofchie Comment and Indirect Link to a Music Video)

CFTC will move forward with an appeal of a federal district court's decision vacating the position limits rule. The Commission approved the appeal by a three-to-two vote.

In explaining the CFTC's decision, CFTC Chairman Gensler said, "As part of the Dodd-Frank Act, Congress directed the Commission to limit promptly speculative positions in physical commodity futures and options contracts and economically equivalent swaps. The rule addresses Congress' concern that that no single trader be permitted to obtain too large a share of the market, and that derivatives markets remain fair and competitive. I believe it is critically important that these position limits be established as Congress required. I support the Commission's continued efforts to put in place position limits on speculative positions by appealing the September ruling."

In dissent, CFTC Commissioner O'Malia said, "To save the Commission's time and resources, it would be much more logical for the Commission to go back to the drawing board now to study the markets and to determine whether new position limits are in fact necessary, and only if so then to decide on the most cost-effective way of establishing such limits. Ideally, it would make sense for Congress to act and clarify the statute in order to end any further debate about its meaning."

Lofchie Comment: I expressed my views on this when the original decision was issued. Link to news item containing comments, the decision and a GREAT MUSIC VIDEO (the real reason for linking to my original comments). But to repeat myself, I would feel a lot better if the CFTC would pick up the intellectual challenge and take on the task of trying to demonstrate cost-benefit value. This is an area where there is data; there are studies; and there are boatloads of academics who don't have an economic stake in the issue.

View press release in full here (links externally to CFTC website). See also: O'Malia Dissenting Statement