GATA - Judge throws out CFTC's position limits rule

Our friend Chris Powell at the Gold Anti-Trust Action Committee put CFTC Commissioner Bart Chilton's comment underneath a Reuters article which reports that a federal judge has thrown out the Commodity Futures Trading Commission's (CFTC's) new position limits rule practically on the eve of its adoption by the CFTC.   

Alexandra Alper and Karey Wutkowski, writing for Reuters, reported:  "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.

Wilkins ruled that, by law, the CFTC was required to prove that the position limits in commodity markets are necessary to diminish or prevent excessive speculation.

He also ruled that the amendments to the 2010 Dodd-Frank financial oversight law "do not constitute a clear and unambiguous mandate to set position limits, as the commission argues."

The ruling is a major victory for traders just two weeks before parts of the new position limits rule were scheduled to go into effect." ... More at the link below. 

Commissioner Chilton responded in a statement:  "This is obviously tough news for those of us who believe there's too much speculative concentration in commodity futures and swap markets. While I respect the judgment of the court, there's no question that huge individual trader positions have the potential to influence prices in a way that hurts legitimate hedgers and ultimately consumers." 

For the entire story and Commissioner Chilton's full statement, please visit GATA at the link below.

Source: GATA

http://www.gata.org/node/11782 

Comment:  There were massive changes in the positioning of traders in last week's (for September 18) COT report which were likely associated with the impending position limits, that may or may not be reversed just ahead. 

We here at Got Gold Report have never been a proponent of draconian position limits per se, holding that position limits are not now and never have been the problem with the metals futures markets.  Rather, it has been and may still be that a select group of elite traders are eligible for huge position and accountability limit exemptions from the existing limits, in effect granting an unfair advantage to traders the CFTC classes as “bona fide hedgers.” 

If the CFTC would adhere strictly to the current position limit regime, granting zero exemptions to any trader, there could not be an unfair concentration by either side of the battlefield, assuming the regs are enforced. 

Indeed, we contend that the new position limits, as proposed, which we believe still allow the harmful position and accountability limit exemptions to “bona fide hedgers,” are much more harmful than helpful.  They almost certainly will lead to decreased liquidity, increased concentration and flight of market participants to opaque overseas markets.

It’s not the current limits that cause concentration in futures markets. It is the CFTC’s granting of large exemptions to them for a favored few that does. 

Don’t let Commissioner Chilton, Chairman Gensler or anyone else confuse to the contrary.  

-- Gene Arensberg for Got Gold Report.