Joshua Roberts/Bloomberg NewsGary Gensler, the chairman of the Commodity Futures Trading Commission.Federal rules set to rein in speculative commodities trading face further delays, as regulators struggle to finalize the controversial proposal amid threats of legal challenges.
The Commodity Futures Trading Commission decided on Tuesday to push back an Oct. 4 meeting during which the agency had been scheduled to vote on the rules. The commission’s chairman, Gary Gensler, is expected to notify his fellow commissioners that the agency is likely to take up the proposal on Oct. 18.
Bart Chilton, a Democratic member of the agency and a devoted supporter of the so-called position limits plan, lamented the delay. “I continue to be troubled by the pace of implementing position limits as Congress has directed,” he said.
The agency, which must enact some 50 new rules under the Dodd-Frank financial regulatory overhaul, has struggled to keep pace. It already announced plans to push some rules into 2012 — a delay of more than six months.
The agency’s decision on Tuesday was the latest in a long line of setbacks for the position limits plan. Under the Dodd-Frank Act, the limits were supposed to kick in during January. Then the commission planned to vote on the proposal in September, but delayed it to further bolster the cost-benefit section of the rule.
“I want to be sensitive to the costs,” Scott O’Malia, a Republican member of the commission, said recently.
The position limits would cap the amount of futures contracts that a single trader or firm can hold on 28 commodities like oil, wheat and corn, a response to wild price fluctuations that can hurt consumers at the gas pump and in the supermarket. Existing limits apply to only nine items.
The proposal has emerged as one of the most contentious matters stemming from Dodd-Frank. The regulator received a barrage of letters about its plan, some 13,000 comments in total, some from supporters like Senator Carl Levin, Democrat of Michigan, who wrote that the plan was a “critical step to stop excessive speculation.”
But many responses came from unhappy Wall Street trade groups. Some industry lobbyists and lawyers note that Dodd-Frank leaves it up to the agency to enforce position limits only “as appropriate,” raising the question of whether limits are at all in fact necessary.
Other groups have even issued thinly veiled threats of legal action. In March, for instance, the Futures Industry Association urged the commission to scrap its position limits plan, saying it “may be legally infirm.”
The threats have resonated at the agency in the wake of a recent court ruling that struck down another Dodd-Frank rule. In July, the United States Court of Appeals for the District of Columbia Circuit rejected the so-called proxy access rule by the Securities and Exchange Commission, rebuking that agency for not fully evaluating the rule’s economic effects.