A couple of securities industry lobby groups have filed a legal challenge to proposed rules in the United States that would limit the positions that investors may own in certain commodities.
The International Swaps and Derivatives Association, Inc. and the Securities Industry and Financial Markets Association announced that they are bringing a legal challenge against the Commodity Futures Trading Commission’s rule that they believe “may adversely impact commodities markets and market participants, including end-users, by reducing liquidity and increasing price volatility.”
They also contend that the CFTC’s rulemaking process was procedurally flawed, that it adopted the rule without determining the necessity and appropriateness of position limits, and that it didn’t conduct any meaningful cost-benefit analysis on the rule, among other things.
“ISDA, SIFMA and our members in the US and around the world strongly support financial regulatory reform that reduces systemic risks and helps to create a more robust and transparent global financial system,” said Conrad Voldstad, chief executive officer of the ISDA, and Timothy Ryan, Jr., SIFMA’s president and CEO. “Unfortunately, the Position Limits Rule as adopted by the CFTC was poorly crafted based on an incorrect reading of the law, and absent any sound economic or cost benefit analysis. It has the potential to harm markets at a time when they can least afford it.”
“The evidence is overwhelming that position limits are, at best, unnecessary and may, at worst, negatively impact commodity markets and users,” Voldstad said. “Numerous studies have been conducted by government agencies and others into commodity price volatility and little, if any, support exists for the idea that speculation causes that volatility or that position limits curb speculation.”