Analysis: CFTC “position points” lack bite of hard limits
The largest speculators in U.S. commodity markets have little to fear from a new plan by their regulator for heightened surveillance -- a precursor to position limits that won't likely force anyone to exit trades. The new plan, involving "position points" rather than strict limits, is an attempt to appease CFTC Commissioner Bart Chilton, who says the agency should act faster to make sure speculators cannot help drive up prices at a time when food and copper have hit records and oil nears $100 a barrel.
It is an interim measure until the CFTC has the data needed to put in place speculative curbs required by a new Wall Street reform law. But barring an extreme price spike or market emergency, lawyers and analysts say the CFTC probably will not force speculators exceeding the "position point" thresholds to liquidate positions.
If the plan results in ad hoc market intervention, the CFTC risks hurting liquidity and distorting prices, said Sharon Brown-Hruska, a vice president of NERA Economic Consulting and former CFTC commissioner. "While I have high regard for the commissioners, I do not know how they know the 'right' number or points," she said.
Publication
Reuters
Date
January 7, 2011
Cross References (links may require a Cabinet subscription)
Dodd-Frank Act, Title VII, Sec. 737