CFTC Proposes Positions Limits for Derivatives, Commissioner to Step Down

As the Commodity Futures Trading Commission (CFTC) has approved a revised proposal to pass a positions limits for derivatives law, commissioner Bart Chilton announced that he will be leaving the CFTC “in the near future.”

In a statement announcing his soon-to-be resignation, Chilton said he considers the positions limit law “to be the signal rule of my tenure here at the Commission.” As part of the Dodd-Frank Act, the CFTC was directed to pass speculation limits “to prevent any single trader from obtaining too large a share of the market to ensure that derivatives markets remain fair and competitive,” said CFTC chairman Gary Gensler.

In September 2012, however, a federal district court ruled against the CFTC’s proposed law, saying that the agency did provide sufficient rationale for its purpose.

The rule would expand the scope of position limits to derivative contracts for 28 referenced commodities in agricultural, energy and metals markets, and now, Chilton believes the revised law “should be unassailable in court, good for markets and good for consumers.”

While three commissioners voted in favor of the proposal, there was one dissenter, Scott O’Malia. “The Commission relies on a new legal strategy—but not new data—in order to circumvent the spirit of the district court’s decision,” O’Malia said in a statement. “[T]he proposed rule now hides behind Chevron deference and invokes the Commission’s ‘experience and expertise’ in order to justify setting position limits without performing an ex ante analysis using current market data.”

The CFTC is now accepting comment on the proposed law.