FACTBOX-Pros and cons of US CFTC energy position limits

WASHINGTON, April 26 (BestGrowthStock) – The U.S. Commodity Futures Trading
Commission proposed in January to cap the number of contracts traders can
hold in oil and gas markets, attracting more than 7,500 public comments on
a plan before a Monday deadline.

Here is a summary of the main arguments made during the comment period
for and against position limits.


* Limits would curtail excessive speculation.

* Lack of limits has exacerbated speculation, making prices too

* Energy users complain it’s harder to hedge price risk with big
financial players tossing so much money into futures and options.

* Some say proposed limits should be even stricter.


* Limits would push large traders to overseas or to unregulated
over-the-counter markets, hurting liquidity in futures markets, and
ultimately making prices more volatile.

* Would raise costs for some businesses engaged in hedging and make
markets less efficient

* A raft of studies show speculators were not responsible for
distorting energy prices during run-up to records in 2008. [ID:nN18245222]

* Some argue the CFTC does not have the legal authority to impose
position limits. [ID:nLDE62I1F9]

* CFTC should wait until it finds out what authority it will get from
Congress for over-the-counter markets.

* Rule would require aggregation of speculative positions for all
accounts owned by the same company, regardless of whether the accounts have
independent control. This would bring large, diversified companies closer
to the position limits. [ID:nN11140284]

* Provision for hedge exemptions would require exiting speculative
positions, which could force large, diversified players to spin off parts
of their businesses. [ID:nN17240157]

* Plan would cap size of exchange-traded index funds, leading to
smaller funds with higher costs for investors and an overall drop in
liquidity for markets. [ID:nN23225675]

* Plan could hurt new or smaller exchanges trying to compete with
larger players because it would limit positions at individual exchanges
based on open interest seen in the previous year. [ID:nN13238656]

Stock Market Money
(Reporting by Christopher Doering and Roberta Rampton)

FACTBOX-Pros and cons of US CFTC energy position limits