CFTC issues position limits, SEF rules

WASHINGTON (BestGrowthStock) – The following are highlights from a U.S. Commodity Futures Trading Commission hearing on Thursday that introduced rules for swap execution facilities, and limits for speculative positions held by commodity traders.

It was the eighth meeting the CFTC has held as part of a broader push by the agency to implement rules to overhaul the $600 trillion over-the-counter swaps market under the Dodd-Frank financial law enacted in July.

Speakers at the hearing include Chairman Gary Gensler and commissioners Michael Dunn, Jill Sommers, Bart Chilton and Scott O’Malia.

GENSLER ON SEFS PROPOSAL:

“I think it fulfills Congress’ mandate to have rules with regard to SEFs that promote transparency through the trading of swaps on these things called swap execution facilities. The meaning that Congress gave to it is that there be transparency and also that there would be flexibility. I think this proposal does that.

It will afford market participants the ability make firm bids or offers, if they choose to.”

O’MALIA ON POSITION LIMITS:

“I am supporting today’s release of the proposed rulemaking regarding position limits.”

“Delay is preferable to error.”

“Without specific swaps data, we have no ability to claim we are applying enforceable limits without understanding the full size of the market. And this is something the Commission ought not be held accountable for.”

“While the proposal meets the mandates of the Dodd Frank Act, this proposal still suffers from significant flaws in its complexity, and the likelihood of achieving an end state of controlling excessive speculation remains in question.”

GENSLER ON POSITION LIMITS:

“I support the proposed rulemaking to establish position limits for physical commodity derivatives.”

“The CFTC does not set or regulate prices. Rather, the Commission is directed to ensure that commodity markets are fair and orderly to protect the American public.”

This plan “would ensure sufficient market liquidity for hedgers as well as efficient price discovery.”

SOMMERS ON POSITION LIMITS PROPOSAL:

“Today we do not have the data we need to effectively set position limits. Moreover, in the absence of any data, the limits that we set will be completely unenforceable.

I think it’s bad policy to promulgate regulations that are not enforceable.”

SOMMERS ON SEFS PROPOSAL:

“It also requires that to be registered as a SEF, an applicant at a minimum must provide market participants with the ability to post both firm and indicative quotes on a centralized electronic screen accessible to all market participants who have access to the swap execution facility.

In my view this provision is not mandated by Dodd-Frank and may limit competition by shutting out applicants who wish to offer (Request For Quote) systems without this type of functionality.”

CHILTON ON POSITION LIMITS TO REUTERS TELEVISION:

“This is going to help us ensure these markets are efficient and effective and devoid of fraud abuse and manipulation.”

CFTC issues position limits, SEF rules