UPDATE 1-US trading watchdog to drop appeal in commodity limits case
WASHINGTON Oct 28 (Reuters) - The U.S. derivatives regulator promised to drop its legal fight to retain a rule that would set limits on commodity speculation, instead opting for a rewritten version, which it is set to adopt in a vote next month.
A District Court last year knocked out the rule on so-called position limits issued by the Commodity Futures Trading Commission. The agency then appealed, while at the same time starting to write a new rule.
"If the Commission votes to issue the (proposed rule) as anticipated, it will immediately file a motion in this Court ... to dismiss voluntarily this appeal," the CFTC said in a court document on Monday.
The CFTC has called a vote over the new rule on Nov. 5, ordinarily a sign that a majority of commissioners is in favor. The new rule will remove an important irritant for the bank groups fighting the rule.
It will also contain a better legal justification to conform with the court ruling that the CFTC had failed to prove that the limits were needed, and will better weigh the costs and benefits of the rule.
The CFTC has always had the possibility of imposing position limits on market parties, but the Dodd-Frank law to overhaul Wall Street after the financial crisis of 2007-09 gave it far greater powers to do so.
Banks like Goldman Sachs and Barclays had said before the court that the fact that they needed to aggregate holdings of companies in which they owned as little as 10 percent meant high compliance costs.
The new rule now allows exemptions for positions held by firms in which they own minority stakes of between 10 and 50 percent, Reuters reported this month.
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