Reuters: Regulatory News: UPDATE 2-US court throws out landmark commodity trading crackdown

Reuters: Regulatory News Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

UPDATE 2-US court throws out landmark commodity trading crackdown Sep 28th 2012, 20:43 Fri Sep 28, 2012 4:43pm EDT * CFTC passed rule as part of 2010 Dodd-Frank reform law * Industry challenged CFTC's authority on position limits * Judge rules that Dodd-Frank did not mandate limits * Tosses rule back to CFTC for further consideration * Marks victory for traders weeks before effective date By Alexandra Alper WASHINGTON, Sept 28 (Reuters) - A U.S. judge handed an 11th-hour victory to Wall Street's biggest commodity traders on Friday, knocking back tough new regulations that would have cracked down on speculation in energy, grain and metals markets. Judge Robert Wilkins of the U.S. District Court for the District of Columbia threw out the U.S. Commodity Futures Trading Commission's new "position limits" rule, and sent the regulation back to the agency for further consideration. In a sharply worded opinion, Wilkins found that the CFTC misinterpreted the 2010 Dodd-Frank financial reform law that includes the position limits language. He ruled that Dodd-Frank does not include a "clear and unambiguous mandate to set position limits" and the CFTC was required to prove caps are necessary to diminish or prevent excessive speculation. "The agency failed to bring its expertise and experience to bear when interpreting the statute and offered no explanation for how its interpretation comported with the policy objectives of the Act," Wilkins wrote. CFTC Chairman Gary Gensler said he was disappointed by the ruling, and the agency is considering ways to proceed. He also stated his view that the CFTC has clear authority to make position-limit rules. "I believe it is critically important that these position limits be established as Congress required," Gensler said in a statement. The ruling hands traders a major victory just two weeks before parts of the position limits rule were to take effect. It is the second Dodd-Frank reform to be knocked out by the courts, and the first such setback for the CFTC. A U.S. appeals court last year rejected the Securities and Exchange Commission "proxy access" rule that would have made it easier for shareholders to nominate directors to corporate boards. That court ruled that the SEC had failed to properly weigh the economic consequences of the rule, an argument that had also been used to challenge the CFTC's position limits. The Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association brought the suit against the CFTC, arguing that the regulations would force their members to drastically alter their businesses, cost them tens of millions of dollars, and send customers fleeing. Wall Street has also long argued that regulators have not proven that position limits would curb speculation in markets and prevent disruptive price spikes. SIFMA and ISDA said in a statement that they are "extremely pleased" that the rule has been vacated. The agency passed the position limit rule in October 2011, in a bid to limit the number of contracts traders can hold in 28 commodities, including oil, coffee and gold. For Wall Street's biggest banks like JP Morgan and Morgan Stanley, the rule threatened to put a lid on one of their biggest growth areas: selling commodity derivatives to investors. The CFTC approved the position limits by a 3-2 vote, with the Republican commissioners questioning the agency's authority to pass the reform. The ruling comes just as the agency shows it is getting tough with excess speculation through enforcement. In the past month alone, the CFTC has penalized firms and individuals more than $2 million for violations in cotton, oilseed and grain markets that area already subject to limits. Position limits have a heavily politicized issue for years, with lawmakers and President Barack Obama arguing that regulators should be doing more to rein in traders who may be driving up the price of oil for consumers. Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions