US Senate bill would force CFTC to act on position limits

* Sen Sanders to propose position limit bill next week

* Bill would force CFTC to curb oil market speculation

* Proposal latest effort to prod CFTC action

By Christopher Doering

WASHINGTON, June 2 (Reuters) - An outspoken U.S. senator who criticized the country's futures regulator for failing to crackdown on energy speculation said on Thursday he will introduce legislation next week that will force the agency to act.

Senator Bernie Sanders said the legislation would force the head of the U.S. Commodity Futures Trading Commission to use emergency authority to impose limits on the positions investors can take in crude oil, gasoline and heating oil. The move could occur without support from the majority of the agency's commissioners.

The bill also would raise margin requirements in the markets and force big Wall Street houses to live within prescribed limits.

"We cannot allow Wall Street speculators to continue to rip off the American people at the gas pump any longer," said Sanders, an Independent from Vermont.

U.S. lawmakers have turned up the heat on the CFTC to curb oil speculation by imposing position limits on the number of contracts big market players can hold in oil and other commodities.

Efforts to impose position limits have come as oil prices hover near $100 a barrel and consumers pay nearly $4 a gallon for gasoline to fill up their automobiles.

President Barack Obama has blamed speculators for driving gasoline prices higher, saying there was enough oil in world markets to meet demand. The administration created a working group of federal agencies to probe potential fraud in the energy markets.

Sanders said the CFTC violated the law when it failed to impose position limits on energy and other commodities by January, as required under the Dodd-Frank financial reform law. [ID:nCFTCREG]

The Sanders legislation, which was still being drafted, would increase margin requirements for speculative trading in crude oil and heating oil to 25 percent.

In addition, it would end all bona-fide hedging exemptions for bank holding companies including any of their affiliates and subsidiaries, such as Goldman Sachs (GS.N), Morgan Stanley (MS.N), JP Morgan Chase (JPM.N), Citigroup (C.N), Bank of America (BAC.N), and Credit Suisse (CSGN.VX).

Gary Gensler, the CFTC chairman, has not said when the agency would finalize position limits rules.

The Dodd-Frank law passed last July gives the agency the power to set position limits to curb excessive speculation "as appropriate" in 28 commodities traded in energy, metals and agricultural markets.

But some of the agency's own commissioners are skeptical the limits would prevent a run-up in prices, and experts and traders have long said the rules risk making markets more volatile by reducing liquidity.

(Editing by Lisa Shumaker)