* Industry groups have legally challenged position limits
* Senators says Dodd-Frank required the rulemaking
* Say rule backed up by 7 years of congressional study
WASHINGTON, April 13 U.S. Senator Carl Levin and
18 other senators have filed a friend-of-the-court brief to help
the U.S. commodities regulator defend its rules on position
limits in oil markets aimed at preventing excessive speculation.
The U.S. Commodity Futures Trading Commission passed the
rules in October, but industry groups have sued to stop the
rules from taking effect, saying they would irreparably harm the
Levin, a Michigan Democrat, and the other senators argued in
their amicus brief that seven years of congressional studies
back up the need for position limits. They rejected the industry
groups' contention that the 2010 Dodd-Frank reform law did not
explicitly require the CFTC to put the rules in place.
"Oil supplies are plentiful and demand is down, so high gas
prices can't be explained by ordinary market forces of supply
and demand," Levin said in a statement.
"The financial industry slapped the CFTC with a lawsuit
claiming Congress never meant for the trading limits to prevent
excessive speculation to be mandatory, but our amicus brief
shows that is exactly what we meant and what the law requires."
The senators who filed the brief were Democrats and one
The Securities Industry and Financial Markets Association
(SIFMA) and the International Swaps and Derivatives Association
(ISDA) filed their legal challenge in December.
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.
SIFMA and ISDA argue that the regulations would force their
members to drastically alter their businesses, cost them tens of
millions of dollars, and send customers fleeing.
They also slammed the agency for failing to review
thoroughly the economic impact of the rules on markets, which
thrive on the liquidity provided by traders with big positions,
Their suit asks the court to block temporarily the
controversial new rules - set to take effect later this year -
and strike them down completely.
Judge Robert Wilkins of the U.S. District Court for the
District of Columbia said at a hearing in February that he would
rule swiftly on the short-term block.
Bart Chilton, a Democratic Commissioner and outspoken
proponent of curbs on speculative trading, welcomed the
"It seems to me that the plain language of the law would be
enough to spit out this case, but when you have Senators and
Representatives who actually wrote the provision expanding upon
the Congressional intent, that's really persuasive," he said in
The CFTC will implement the limits in two phases. The agency
must first finish its swaps definition before it can implement
limits for the spot month. The final limits for all contract
months can only be set a few months after the agency has
collected a year's worth of swaps data, a process that is
expected to end in August.