* Hearing on preliminary injunction request Feb 27
* CFTC: plantiffs fail to meet criteria for injunction
* CFTC narrowly approved controversial rule in Oct.
By Christopher Doering
WASHINGTON, Feb 18 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
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
"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
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.