Industry Stacked CFTC Committee Says No to Position Limits

An advisory committee stacked with industry representatives has issued a report advising the Commodities Futures Trading Commission (CFTC) to drop its plans for position limits on commodities.

Dennis Kelleher

Dennis Kelleher

CFTC’s Energy and Environmental Markets Advisory Committee approved the report by an 8-1 vote — with the one dissenting vote being Public Citizen’s Tyson Slocum. Slocum issued a written dissent.

Slocum said that majority report was flawed because it “ignores the large body of evidence and research showing the clear need for position limits” and that “the report’s conclusions reflect the inadequate professional diversity of a committee whose membership is heavily weighted in favor of Wall Street and big energy interests.”

Slocum said that the eight members who voted for the majority report were two representatives of the oil and gas production industry (ConocoPhillips and the Natural Gas Supply Association), one trade association representing investor-owned electric utilities (Edison Electric Institute), two for-profit exchanges and clearinghouses for commodity and financial markets (ICE and CME), two proprietary traders (Vectra Capital and Morgan Stanley/Futures Industry Association), and one academic affiliated with commodity trading interests.

“The 2010 Dodd-Frank Act clearly ordered the CFTC to establish position limits as a primary tool to combat the excessive speculation that had been harming consumers and hindering market integrity,” Slocum said. “While a federal court remanded the rule after a 2012 challenge by Wall Street trade associations, the re-proposed rule fully documents that excessive speculation has indeed been a major problem, and that position limits offer an important cure to help protect consumers.”

“If the CFTC moves forward with the rule, American consumers can expect that prices will be more a result of supply and demand rather than dictated by the whims of powerful speculators. Position limits are created for the purpose of maintaining stable and fair markets for consumers. Limits protect futures markets from excessive speculation that often create disastrous price spikes.”

“But the majority report ignores this evidence and instead, without providing any new evidence to back up its claims, argues that speculative position limits are unneeded; that if implemented they would cause harm to the market and market participation; and that for-profit exchanges – not public regulators – should instead apply flexible ‘position accountability regimes’ that would be developed, overseen and run by the for-profit exchanges. “

Dennis Kelleher of Better Markets said that “every American pays more for gas, heating oil and cereal than they have to due to unregulated excessive speculation in the commodities markets.”

“That’s why the law requires the CFTC to stop it,” Kelleher said. “But, the CFTC has let the industry fox into the public interest henhouse in the CFTC’s Energy and Environmental Markets Advisory Committee where 90% of the membership is industry representatives.”

“Unsurprisingly, a report being released today by that industry-dominated Committee recommends that the CFTC act in a way that maximizes their lucrative commodities businesses rather stopping excessive speculation as the public interest requires.”

“For the reasons detailed in a minority report by the lone pubic interest representative on the Committee, such a biased industry-stacked Committee should be ignored and the CFTC should do what the law requires and what American consumers need and deserve: stopping excessive speculation now.”


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