US caves in on trading rules

City A.M. Reporter
THE US futures regulator has yielded on several contentious parts of a plan to crack down on commodity speculation, marking a victory for banks and traders who have lobbied to limit increased market oversight.

A draft of the final rule by the Commodity Futures Trading Commission maintains that the Dodd-Frank Act requires position limits -- caps on the number of contracts a single trader can hold -- to prevent excessive speculation in oil, grain, silver and other commodity markets.

But the CFTC modified areas of the plan that were a major concern for big banks like Morgan Stanley and firms like Shell, including whether or not different arms of a single company must count separately managed positions as one, and whether swaps and futures positions can be offset.

While sticking to an unpopular plan to phase in limits over time as the agency gathers more data on the opaque $600 trillion over-the-counter derivatives market, the proposal is the latest sign that regulators are at least partly responding to cries from the financial industry -- as well as Republicans -- that overly tough rules may have a detrimental impact.