Analysis: CFTC “position points” lack bite of hard limits

By Roberta Rampton and Christopher Doering

WASHINGTON | Fri Jan 7, 2011 12:46pm EST

WASHINGTON (Reuters) – The largest speculators in U.S. commodity markets have little to fear from a new plan by their regulator for heightened surveillance — a precursor to position limits that won’t likely force anyone to exit trades.

Traders such as Goldman Sachs, JPMorgan and Morgan Stanley will likely get extra questions about their over-the-counter swaps from the Commodity Futures Trading Commission when they exceed certain complex thresholds in 28 energy, metals and agricultural futures markets.

The added surveillance, known as the recently proposed “position points”, is an attempt to appease Bart Chilton, a CFTC commissioner who says the agency should act faster to make sure speculators cannot help drive up prices at a time when food and copper have hit records and oil nears $100 a barrel.

It is an interim measure until the CFTC has the data needed to put in place speculative curbs required by a new Wall Street reform law.

But barring an extreme price spike or market emergency, lawyers and analysts say the CFTC probably will not force speculators exceeding the “position point” thresholds to liquidate positions.

Emergency powers are reserved for times when markets are threatened by manipulation or during major disturbances, said Jill Sommers, a Republican commissioner.

“It’s my opinion that our emergency authority does not extend to us being able to tell a market participant to get down just because a position is large. There are other people who feel differently,” Sommers told Reuters.

Continue reading here.


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