Commodity Futures Trading Commission (CFTC) chairman Gary Gensler said yesterday that the agency will hold hearings in the next few weeks to seek comments from consumers and market players on whether to set position limits on all commodity futures contracts.
A tougher regime in the US could be a boon for London’s commodity exchanges which do not have position limits, despite efforts to try and impose trans-Atlantic caps.
“Our first hearing will focus on whether federal speculative limits should be set by the CFTC to all commodities of finite supply, in particular energy commodities such as crude oil, heating oil, natural gas, gasoline and other energy products,” said Gensler.
The CFTC will also seek comment on who should qualify for exemptions from position limits. Some USpoliticians say exemptions should go only to people who plan to buy the commodity and not to those who hedge financial risk.
Oil prices soared to a record of above $147 (£91) a barrel last July and grains contracts surged to historic levels as some market players complained that hot money distorted futures markets.
Last month the Obama administration sent Congress a wide-ranging plan to tighten US financial regulation and prevent another banking and market crisis, including tougher oversight of over-the-counter derivatives.
Phil Flynn, analyst at PFG Best Research, said Gensler was bowing to political pressure and the tightening of position limits won’t work unless traders face worldwide restrictions.
“I think it’s a kind of witch hunt,” said Flynn.