Despite scant evidence of a negative impact
of speculation in the oil market, in seeking to prohibit excessive speculation
and its possible effect on price volatility in futures markets, the US CFTC approved
final rules on federal speculative positions limits on commodity futures,
options and swaps positions of speculators for 28 commodities in October
2011. As we reported in previous OMRs, position limit rules are being
challenged by the International Swaps and Derivatives Association (ISDA) and
the Securities Industry and Financial Markets Association (SIFMA) in court.
They are challenging the final rule based on whether the Commission overreached
its mandate by pre‐emptively setting a position limit on derivatives contracts,
amid almost non‐existent cost‐benefit analysis in the final rulemaking, as well
as insufficient review of some of the comment letters, which they argue that
the Commission was bound to take into account. The court still has to deliver
its decision on the speculative position limit rule.
