* Hearing on preliminary injunction request Feb 27
* CFTC: plantiffs fail to meet criteria for injunction
* CFTC narrowly approved controversial rule in Oct.
WASHINGTON, Feb 18 (Reuters) - The U.S. futures regulator said the financial industry had failed to prove that a federal court should temporarily block regulations that the agency approved last year, aimed at preventing excessive speculation in the commodity markets.
The Securities Industry and Financial Markets Association (SIFMA) and the International Swaps and Derivatives Association (ISDA) told the court earlier this month if the U.S. Commodity Futures Trading Commission's rules go into effect they would irreparably harm their members and the public.
But the CFTC late on Friday countered in a 52-page filing that the groups failed to meet any of the criteria needed for a preliminary injunction, and as a result their request should be denied by the U.S. District Court for the District of Columbia.
The regulator wrote that while the groups said some of their members would need to spend millions of dollars to comply with the new rule "they never allege that these costs come anywhere close to threatening any member's business."
"Two of Plaintiffs' five declarants provide estimates of compliance costs. But these costs are minuscule when compared to the annual revenues of their companies, which are in the tens of billions of dollars," the CFTC said.
The filing by the CFTC comes about a week before the court holds a hearing on February 27 to consider the preliminary injunction request.
Earlier this month, SIFMA and ISDA said unless the court granted a preliminary injunction to delay the rules until the case is decided, the industry would shoulder additional costs that could never be recovered.
In addition, the groups argued market participants would be forced to forgo trading strategies and their ability to hedge against risks would be damaged.
The CFTC's groundbreaking rule, put in place to restrict the number of contracts a trader can hold in commodities such as gold and oil, was narrowly approved by the agency's five commissioners on Oct. 18 by a vote of 3-2.
In its filing on Friday, the CFTC downplayed the argument by the two firms that said an injunction would be in the public's best interest, citing the 2010 Dodd-Frank financial reform overhaul that "mandated the expeditious imposition of federal position limits."
"Any delay pending judicial review will only frustrate Congress' mandate and the public interest that Congress determined the required position limits would serve," the CFTC said.
The position limits rule has turned into arguably the most contested measure to make its way out of the agency. Even the CFTC's own commissioners were unable to agree if limits are necessary and whether the agency has gone beyond its legal mandate by putting them in place.
SIFMA and ISDA sued in December to block the rules, arguing the CFTC exceeded its authority and that they were not adequately justified. Traders also have cried foul, saying the rules were a politically motivated effort to cap prices that will make markets less liquid and more volatile.