CME slams CFTC's speculator plan, wants it shelved

WASHINGTON (Reuters) - CME Group Inc, the world's largest derivatives exchange, has slammed a U.S. futures regulator's plan to curb speculation in energy markets as being without factual basis and urged that the proposal be shelved.

The proposal, which calls for stricter position limits on energy futures traders, does not meet the "factual and statutory basis" required to impose them, CME said in a letter to the regulator, the Commodity Futures Trading Commission.

The exchange operator asked its main regulator to drop the plan. It cited pending legislation in Congress, arguing that, at a minimum, the CFTC should defer further action until new financial reform laws are in place.

"Despite the political rhetoric, the assertion that 'speculators' are driving energy price increases is factually incorrect and unfairly villainizes the role of speculators," CME Group said in the April 26 letter, obtained by Reuters on Tuesday.

Under some political and consumer pressure, the CFTC has proposed limits on the positions of energy traders in order to curb price spikes such as those in oil in 2008. Monday was the last day for public comment on the plan, which has received support from airlines and shippers but drawn sharp criticism from banks and others.

Asked on Monday whether he would drop the position limit plan, CFTC Chairman Gary Gensler said the commission first needed to read the comments. "You're asking a person to consider what they haven't yet read," Gensler told the Reuters Global Financial Regulation Summit here.

"We've got a lot of comments. We're going to take those comments seriously, as we should, and learn from them and consider them and see what the next steps are," he said.

The limits as initially proposed in January were seen as less onerous than some market participants had anticipated.

CME Group has criticized the plan in the past. But the letter's tone was sharp relative to its previous comments.

The parent of the Chicago Board of Trade, the Chicago Mercantile Exchange and the New York Mercantile Exchange again warned that the CFTC risks driving trading and liquidity "to less restrictive venues," adding that legislation pending in the U.S. Congress would compound uncertainty for investors and traders.

"For these very practical reasons, we urge the commission to take a clear stand and determine not to adopt the proposal, or, at a minimum, affirmatively determine to defer further action until after Congress has acted ...," CME Group said.

U.S. lawmakers have crafted legislation meant to avoid a repeat of the worst financial crisis since the Great Depression. It will likely include a measure giving the CFTC oversight of the over-the-counter marketplace, so the position limits can be effectively applied.

The CFTC aimed to address perceptions of "uncontrolled speculation" and "excessive concentration" in the energy markets, the CME said.

"The factual and statutory basis required for the commission to impose new federal speculative position limits on markets for listed energy products has not been established by the commission."

While energy users and distributors have written the CFTC to support the plan for stricter position limits, banks and other financial companies have lined up in opposition. Smaller CME rival IntercontinentalExchange Inc has also urged the CFTC to hold off on the proposal.

Analysts say it is unlikely the proposal will be shelved or seriously altered, particularly given the renewed momentum to crack down on banks in the wake of recent Goldman Sachs Group Inc fraud charges.

CME Group shares were down 1.7 percent at $336.09 on the Nasdaq.

(Reporting by Jonathan Spicer; Editing by Kenneth Barry)