CME sticks with its own position limits after ruling against CFTC

Wed Oct 3, 2012 12:07pm EDT

Oct 3 (Reuters) - Exchange operator CME Group said on Wednesday it will maintain its existing position limits regime after the U.S. Commodity Futures Trading Commission's (CFTC) new rule to curb commodity market speculation was thrown out by a court.

CME Group had proposed a revision to its own position limits rules to bring it in line with the changes mandated by the CFTC, which were due to come into effect on Oct. 12. That rule was thrown out by the U.S. District Court of Columbia on Friday following a lengthy challenge by Wall Street banks.

CME Group said that "in light of the action by the District Court" they were withdrawing plans to revise the exchanges' "Rule 559", which governs the number of commodity contracts an individual can hold on the New York Mercantile Exchange, Chicago Board of Trade, and the Chicago Mercantile Exchange.

"The Exchanges will not be adopting any revisions to Rule 559 at this time, and will continue to consider all requests for exemptions subject to the existing provisions of Rule 559," CME Group said in an emailed notice.

CFTC Chairman Gary Gensler vowed on Tuesday to push ahead with efforts to reinstate the rule, arguing it was mandated by the Dodd-Frank financial reform law. He did not rule out a possible appeal to a higher court.

Bart Chilton, one of five CFTC commissioners said Tuesday that he thought the CFTC should "immediately" appeal against the court decision and seek a stay so that it could go forward.

It should also start drafting yet another rule to address the concerns of the court, Chilton said.

U.S. District Judge Robert Wilkins, who was appointed by President Barack Obama, said the CFTC had failed to prove that it was necessary to impose new caps on speculative bets in 28 U.S. markets, including copper, corn and crude oil, to reduce price spikes and volatility.

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