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Chicago Mercantile Exchange tells CFTC's Chilton to drop dead
CFTC Commissioner 'Disappointed' with CME Group
By Hal Weitzman
Financial Times, London
Wednesday, November 3, 2010
http://www.ft.com/cms/s/0/ffd004f4-e759-11df-880d-00144feab49a.html
CHICAGO -- A top Washington regulator has launched a scathing attack on the CME Group, the biggest US futures exchange, for refusing to co-operate in the introduction of position limits in futures markets.
Bart Chilton, one of the five commissioners of the Commodity Futures Trading Commission (CFTC), the US futures watchdog, told the FT he had been left "frustrated and disappointed" by a meeting with the CME in Chicago on Tuesday ahead of the Futures Industry Association Expo, the industry's annual jamboree.
Under the Dodd-Frank billl on financial regulatory reform, mandatory position limits are due to be introduced in energy and metals markets by mid-January and on agricultural commodities by mid-April.
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However, Mr Chilton said the CME was apparently hiding behind wording in the legislation that said such limits should be introduced "as necessary." The CFTC commissioner said he suspected the exchange group was hoping to use the language to avoid implementing mandatory position limits.
He complained that the CME had "refused to engage in a dialogue" with him over the issue.
"I had hoped to gain some sense of how we should thoughtfully implement the mandatory position limits. Their position, however, is that there isn't a need for additional limits and that the law doesn't require that they even be implemented," Mr Chilton said.
"I think that would be news to the folks who wrote the law," the CFTC commissioner said. "For me, it is very clear what we are required to do. Taking a pass on implementing position limits is a major non-starter. Congress passed the new law, it was signed by the president, and we have to implement limits -- full stop."
Mr Chilton said that by contrast, Intercontinental Exchange, the second-biggest US futures exchange, had been "very helpful and thoughtful" about the issue.
The CME filed a comment with the CFTC last week in which it argued urged for a delay in the imposition of position limits until the CFTC collected more data to enable it to determine and police limits.
Noting that the Dodd-Frank Act allows the CFTC to make broad exemptions to the new rules, the CME also urged the regulator "to accommodate all non-speculative positions."
A CME spokesman said the language of the legislation "might be up for interpretation."
Mr Chilton has proposed extending position limits to financial futures and to high-frequency traders, but he admitted that he had not worked out the details of how such a proposal might function in practice.
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