The Commodity Futures Trading Commission won’t be quite as strict in the position limits it imposes on futures trading due to lobbying by Congress and industry, according to Reuters:
When the new rules are announced, likely in December, they “will probably be less strict than originally contemplated so traders will not be driven to markets with looser regulations,” according to the article:
“There will be limits that will be somewhat tough, but perhaps not as tough as you would have thought if you looked at their statements” this summer, said Craig Pirrong, a finance professor at the University of Houston.
The article also uses an unnamed source who says the CFTC is considering applying speculative limits not only to the spot market but for all months and all monthly contracts combined.
“It also is looking at applying limits to all traders except those that intend to take physical delivery of the product, or bona fide hedgers, according to the source.”
The unnamed source said CFTC Commissioner Michael Dunn, who has expressed concern whether the agency has the necessary experience and structure to set energy position limits, will have a major influence on the decision.
“There is a lot of pressure being applied to him from Congress to get Gensler the third vote do whatever they can do under existing law,” Reuters’ unnamed source said, referring to CFTC Commission Chairman Gary Gensler.
This ‘lighter touch’ isn’t too different from what CFTC commissioner Bart Chilton said when he was in Houston for a conference in October.
“My view is let us err on the high side at first,” Chilton said of position limits.
He said he knows new limits could prompt traders to migrate to less-transparent trading realms or move trading to less strict overseas markets.
“I’m concerned about that too,” Chilton said. “But we need to find a balance.”