CFTC to challenge court ruling on position limits


By Daniel P. Collins
Futures magazine, Chicago
Thursday, November 15, 2012

The Commodity Futures Trading Commission (CFTC) in a brief statement released Thursday afternoon confirmed that it would appeal a federal district court's decision vacating the commission's position limit rule.

The appeal was approved by a 3-2 vote, which was foreshadowed during the Futures Industry Association Expo conference in Chicago two weeks ago when Commissioner Mark Wetjen indicated that he would support an appeal and stated that commission attorneys felt it had a strong case. Chairman Gary Gensler and Commissioner Bart Chilton had already indicated support for an appeal.

Commissioner Scott O'Malia wrote a sharply worded and detailed dissent. In it O'Malia states, "When I voted against the commission's final position limit rule last November, I expressed dismay that the commission had failed to utilize its expertise to lay the necessary foundation for the establishment of position limits. A federal district court affirmed my reasoning in striking down the rule in September. Regrettably, instead of taking the opportunity to revise its flawed reading of the statute, the commission has decided to double down on its no-justification-needed stance by appealing the district court's ruling."

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In announcing the appeal Chairman Gensler stated, "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. ... 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."

O'Malia took issue with the way the commission proponents ignored the court's decision. "The court explicitly stated that the statute unambiguously requires a finding of necessity before establishing position limits," he wrote. "It went on to argue that subsequent parts of the statute are ambiguous. I continue to believe that the statute is crystal clear in calling for a necessity finding -- and that this should be the end of the discussion."

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