On October 18, 2011, the Commodity Futures Trading
Commission ("Commission") adopted, by a vote of 3 to 2, a final rule regarding
position limits for certain physical commodity derivatives ("Final Rule")
pursuant to the Commodity Exchange Act ("CEA"), as amended by the Dodd-Frank
Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act").
Although the text of the Final Rule is not yet available,
the Commission has stated its intent to phase-in position limits in two parts
following effectiveness of the Commission's final rulemaking regarding the
further definition of "swap."
The Commissioners expressed a wide range of opinions for
and against adoption of the Final Rule, in particular with respect to the
effects on commodities markets of imposing position limits on contracts not previously
subject to limits. Chairman Gensler expressed strong support for the Final Rule,
but noted that the rule is in no way intended or able to control pricing.
Despite voting in favor of the Final Rule, Commissioner Dunn suggested that
there was little economic evidence that speculation in previously unregulated
contracts caused higher market prices for underlying commodities, and suggested
that position limits may impair price discovery and the ability of commercial
entities to adequately hedge their business risks. Commissioner Chilton
expressed some dissatisfaction with the Final Rule, but indicated his belief
that it is consistent with the intent of Congress in the Dodd-Frank Act of
imposing position limits on swaps and previously unregulated futures contracts.
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