The Commodity Futures Trading Commission (CFTC) in the "near term" will make additional changes to its weekly Commitments of Traders (COT) report to enhance transparency of futures market participation, and will conduct a series of public hearings on whether to establish speculative position limits for energy and other non-agricultural products.
In a statement issued July 7, CFTC Chairman Gary Gensler said the changes to the COT report will: 1) disaggregate the current commercial category by separating out and categorizing the futures activity of swaps dealers; 2) disaggregate the current noncommercial category by separating out and categorizing the futures market activity of hedge funds and other professionally managed market positions; 3) incorporate data received by the CFTC on all foreign futures market contracts that are linked to U.S. futures contracts; and 4) incorporate data of other futures market contracts determined to perform a significant price-discovery function. Gensler said the CFTC also will continue its so-called "special call" on futures market trading activity of swap dealers and index traders, which he said would be reported quarterly, with a goal of shifting to monthly reporting "in the near term."
Gensler also said the agency will conduct a "series" of public hearings in July and August on whether to begin imposing federal speculative position limits on energy and all other non-agricultural futures contracts, including index traders and managers of exchange-traded funds. He said the first hearing would focus on energy futures contracts, such as those for crude oil, heating oil, natural gas, gasoline and other energy products, as well as other "commodities of finite supply." Among other things, Gensler said the hearings will examine whether speculative position limits would enhance market integrity and efficiency; whether the agency needs additional statutory authority and how to determine appropriate levels for speculative position limits for different markets and various types of market participants. Agricultural futures markets long have been subject to speculative position limits. Gensler noted that views also will be solicited on the CFTC's current rulemaking on whether to revise its process for granting exemptions from speculative position limits for bona-fide hedging transactions or positions. Click here to access Gensler's two-page statement.
In response to Gensler's announcement, Rep. Sander Levin, D-Mich., chairman of the House Homeland Security and Government Affairs Committee's Permanent Subcommittee on Investigations, issued a statement praising the agency's intent to review its policy on speculative position limits to "clamp down on excessive speculation and ensure commodity prices reflect supply and demand, rather than speculators gambling on market prices to turn a quick profit." Levin, whose subcommittee released a report on June 24 attributing the lack of performance in the CBOT wheat futures contract to speculative market activity by index traders, said: "It's long past time to put (speculative position limits) in place for energy commodities...whose price distortions can devastate our economy. We also need the CFTC to begin reviewing and revoking the exemptions and waivers handed out to swap dealers who are not routinely exceeding standard trading limits, overwhelming our commodity markets, and distorting prices."