By Todd Kemp, Senior Vice President for Marketing, Treasurer; and Sarah Gonzalez, Director of Communications and Digital Media
Commodity Futures Trading Commission (CFTC) Commissioner Dawn Stump said her staff is diligently working with other commissioners on a speculative position limits rulemaking, but didn’t give a timeline for a proposal, during a June 11 address in New York City to the Annual Legal Forum of the International Swaps and Derivatives Association (ISDA).
ISDA was one of the organizations that challenged speculative position limits in court in late 2011. Since that time, there have been a number of fits and starts as the agency has proposed, amended and re-proposed a position limits rule.
“Position limits certainly feels like a never-ending saga,” Stump noted. “I worked on it during my time on Capitol Hill – even before the Dodd-Frank Act – and now, a decade later, I have joined the agency and it is still unresolved.”
Stump’s speech referred to an element of ISDA’s objections by stating that CFTC’s staff currently is working toward findings of “necessity and appropriateness” of position limits. That has been a contentious issue since passage of the Dodd-Frank Act in 2010, with Democrats generally maintaining that the law mandates imposition of position limits to tamp down “excessive speculation” across a broad range of commodity derivatives and Republicans generally arguing that position limits must be found necessary and appropriate before they can be imposed.
She recognized that debate “has raged on” over how the CFTC should implement the rules, noting that “uncertainty over whether, when, and what the commission will do about position limits is a constant concern for market participants.”
She also said, “by adhering to common-sense principles,” the agency can adopt position limits rules “that finally provide needed clarity and certainty.”
During her speech, she cited two objectives advocated by the NGFA: that exchanges must “play an integral role” in implementing speculative position limits since they know their markets and customers; and that “one size will not fit all” – a point made repeatedly by the NGFA in public comments to CFTC.
“Not all futures markets are the same,” she noted. “We cannot impose position limits on energy and metals transactions solely on the basis of how the commission has imposed limits in agricultural commodities over the years, and we cannot subject our legacy agricultural contracts to a position limits regime that is best suited to the hedging needs of the energy markets.”