WRAPUP 1-Gensler: US position limits delayed to get rule right

Mon Oct 3, 2011 1:41pm EDT

 * U.S. crackdown on excessive speculation delayed twice
 * CFTC's Gensler: 'Not trying to do this against a clock'
 * CFTC, SEC plans differed for swap-execution facilities
 * Requests for quotes and conflict of interest in focus
 By Jonathan Spicer
 NEW YORK, Oct 3 (Reuters) - The head of the U.S.
derivatives regulator, scrambling to get internal support for
steps to tackle excessive commodity speculation, said delays
are of little concern as long as they yield improved rules.
 "We're not trying to do this against a clock. We're trying
to do this in a way that gets it right," Gary Gensler, chairman
of the Commodity Futures Trading Commission, said on Monday.
 "So a few more weeks is a small thing for us to be
concerned with if we're going to get it thought through in a
better way," Gensler told reporters on the sidelines of a
Wholesale Markets Brokers' Association conference in New York.
 Last month, the CFTC delayed by another two weeks to Oct.
18 its meeting to consider a long-awaited rule on position
limits, or a cap on the number of contracts traders can hold in
commodity markets.
 It was the second time a vote had been postponed, and
sources familiar with the situation told Reuters it was because
Gensler lacks the three votes needed for approval from the
CFTC's five commissioners [ID:nS1E78R1NS].
 The commission has never presented a unified front on
position limits, one of the most contentious pieces of the
Dodd-Frank financial overhaul for big commodity traders.
 In explaining the delay, Gensler said that of the roughly
50 rules the CFTC is tasked to write, position limits alone
received more than half of the public comment letters.
 "On each of the features to the rule there are people who
want changes sometimes to be more prescriptive, sometimes less
prescriptive," he said. "It's a lot to sort through."
 Two sources familiar with the agency's rule-making said the
CFTC commissioners and staff were working on ironing out a
myriad of differences, including details of conditional limits
-- which allow for a higher limit in the spot month in a
cash-settled contract than in a physically deliverable contract
-- as well as the timing of imposing the limits.
 Also part of Dodd-Frank, the CFTC and the Securities and
Exchange Commission are responsible for writing new U.S. rules
for the approximately $500 trillion private swaps market in the
wake of the 2007-2009 financial crisis.
 The two agencies are expected to come up with rules for
swap-execution facilities (SEFs), the venues that will handle
trading of much of the world's swaps. The SEC is responsible
for writing rules for securities-based swaps while the CFTC is
responsible for the rest, which is a far larger market.
 As it drafts a final rule, expected early next year, the
CFTC will focus on differences between its proposal and that of
the SEC, Gensler told the conference. "We are hopeful that
we'll be able to consider the SEF rules in the first quarter of
 Gensler focused on a few differences between the two
agencies on rules for SEFs, including the minimum number of
requests for quotes (RFQs) that will be required before a trade
is made, as well as how responses to the RFQs will interact
with resting orders.
 The CFTC proposed five RFQs while the SEC -- which received
more support from industry players -- proposed one.
 "We're sorting through both of those questions as we move
toward a draft final rule," Gensler said, telling reporters
later: "Some things will change if it is appropriate given what
the law says, to promote transparency."
 The comments shed some light on areas of possible
compromise between the CFTC and the SEC as trading venues,
dealers, funds and end-users of the swaps prepare for the new
 "Our concern is that if we're forced to go out and get five
RFQs, and if there is a requirement to interact with standing
bids and offers ... there's going to be a real problem for the
dealers to get us the best price," William Thum, principal at
investment manager The Vanguard Group, said at the conference.
 Another area of focus for SEFs is differences between the
two agencies' proposals on governance and conflict of interest,
Gensler said. The CFTC has delayed the date for the final SEFs
rules twice.
 (Editing by Dale Hudson)

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