UPDATE 2-Reform’s wording backs CFTC’s position limit push

* Financial regulation text settles on “shall” not “may”

* Stronger wording may not end debate over position limits

* “A regulator’s dream” says one analyst
(Adds quotes from researcher in paragraphs 7 and 8)

By Christopher Doering

WASHINGTON, June 25 (BestGrowthStock) – A historic overhaul of the
U.S. financial system finalized early on Friday agreed the
country’s futures regulator “shall” establish position limits
for physical commodities, opting for the stronger of two words
being debated in reference to regulating futures markets.

While the wording alone — a change from an earlier draft
that said the U.S. Commodity Futures Trading Commission “may”
set limits — may not conclusively end the debate over whether
the agency will move forward on the controversial plan, it
could provide the catalyst to convince skeptical leaders at the
agency to back the measure.

Lawmakers gave the CFTC the discretion to issue exemptions
to the position limits rule to any person, swap, future, option
or other type of transaction.
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Earlier this year, the CFTC proposed position limits for
oil and gas futures markets, but three CFTC commissioners had
said they were reluctant to move forward in the absence of new
authorities from Congress amid fears limits would drive trading
overseas or to less-regulated over-the-counter markets.

“This is a regulator’s dream,” said Craig Pirrong, an oil
market expert and a professor at the University of Houston.

“It gives the CFTC extremely wide discretion, but at the
same time confers the power (to impose limits on
over-the-counter swaps) that has been its main concern,” he
said.

William Black, a professor at the University of
Missouri-Kansas City, said the exemption clause under the
leadership of CFTC Chairman Gary Gensler would prove effective.

“Under a good regulator that would make perfect sense,”
said Black. “Under a bad regulator, the exemptions could
swallow the rule.”

The CFTC opened its proposal to the public, generating
thousands of responses. While many were in favor of the idea,
others questioned whether the agency had the authority to
establish limits. Gensler said his agency did have the power to
set them if necessary.

“We haven’t discussed that,” Gensler said when asked how
the bill might affect CFTC consideration of position limits on
energy contracts.

Investing Advice

(Editing by Lisa Shumaker)

(additional reporting by Charles Abbott)

UPDATE 2-Reform’s wording backs CFTC’s position limit push