US to Take Tough Measures to Curb Speculations by Commodity Traders

October 18 00:00 2011

New York, October 18 ( – The United States is likely to take some tough steps on Tuesday to curb speculation in commodity markets. This will probably shift the focus of an ongoing four-year debate from the regulators to the courts.

The Commodity Futures Trading Commission is ready to vote in favor of “position limits” that will cap the number of futures, swaps and options contracts any trader can hold. Wall Street and trading companies have decried this measure as a misguided political attempt to cap soaring oil and grain prices.

If the key features of the draft of the rule are maintained, the industry should get some relief because the draft relaxes the tough limits on whether separately controlled accounts must be aggregated and whether swaps and future positions can be offset.

However, banks such as Morgan Stanley and industry traders like Cargill will have to scale back business, stem influx of investor capital and hedge fund trading and upend age-old practices because the measures will do little to temper deep frustrations over the contentious plan.

Industry experts and lawyers say that a lawsuit to stop the measure coming into force seems likely, which will prove to be another impediment for CFTC Chairman Gary Gensler, who is struggling against emboldened Republicans and a hostile Wall Street to put in place the rules required by the Dodd-Frank financial reforms.