* Comment period ends Monday on energy position limits
* Industry concerns outweighed by populist cry for curbs
* Congress poised to broaden CFTC's powers
* That could increase comfort of wavering commissioners
By Christopher Doering and Roberta Rampton
WASHINGTON, April 26 Some of the biggest
players in U.S. energy markets have told the Commodity Futures
Trading Commission that its proposal to curb speculation is
misguided and will drive investors to overseas and unregulated
But as a public comment period ends on Monday, the
arguments against the energy position limit plan by the top
futures regulator may be eclipsed by the political momentum
for a clampdown on banks, widely perceived as sapping money
from Main Street using little understood derivatives.
The shifting political dynamic makes it more likely that
CFTC Chairman Gary Gensler gets the support he needs from
fellow commissioners to make good on his pledge to prevent
excessive speculation in energy markets.
"I think really the world has turned substantially in the
last four weeks," said Michael Greenberger, a law professor at
the University of Maryland and a former CFTC official.
While Gensler may choose to wait until Congress passes
financial regulatory reforms that are at the top of
Washington's agenda -- reforms that include substantial new
powers for the CFTC over the currently unregulated swaps
market -- analysts say it's unlikely that the proposal will be
shelved, or substantially altered.
"I can't really see him, given who he is, just letting it
lay fallow," said Geoffrey Aronow, partner with the law firm
of Bingham McCutchen and a former CFTC enforcement director.
LEGACY OF OIL OVER $147 A BARREL
The position limit proposal stems from the spike in oil
futures prices to a record of more than $147 a barrel in 2008.
Even though CFTC economists said the surge was due to supply
and demand, many people blame an influx of hot money from
funds and other financial investors.
The proposals aim to limit investment positions of big
traders to prevent them from having too much influence on the
market. Large players would be required to exit speculative
trading positions in certain circumstances, which could be a
big blow to major oil companies such as BP Plc (BP.L)(BP.N)
and derivatives dealers such as JPMorgan Chase & Co (JPM.N).
"If prices are being controlled by basically Wall Street, I
don't think that is how it should be handled," said Kurt
Denker, an insurance claims adjuster in Harlingen, Texas, near
the border with Mexico.
Denker, who sometimes spends more than $800 a month on
fuel, was one of thousands of Americans who e-mailed form
letters to the CFTC supporting the plan for limits.
"I use a lot of fuel in one month's time and it does affect
my pocketbook tremendously," Denker told Reuters.
Lawmakers, pressured by their constituents, urged the CFTC
to do more to tamp down speculation, a challenge accepted by
Gensler when he became the top futures cop almost a year ago.
The agency proposed the limits in January. Players
initially dismissed them as too high to matter, but became
more worried when they examined the details.
The proposal "is unduly onerous, will significantly limit
the usefulness of the U.S. futures markets to international
traders, and is premature in light of pending congressional
legislation," said Hans Ephraimson, the CEO of DB Commodity
Services, a unit of Deutsche Bank (DBKGn.DE)(DB.N), in a
comment letter to the CFTC. [ID:nN23225675]
In January, three of five CFTC commissioners expressed
similar worries that the limits could drive trade away from
U.S. futures markets.
But Congress has since moved at a blistering pace to
overhaul the country's tattered financial regulatory
framework, and seems likely to give the CFTC oversight of the
unregulated derivatives market, including a mandate to set
position limits there, too.
That's likely to address the concerns of Democratic
Commissioner Michael Dunn -- if not also the two Republicans
serving on the CFTC.
"It might make quite a bit of difference if reform
legislation goes through," said former CFTC Chairman Philip
McBride Johnson, now with the law firm Skadden, Arps, Slate,
Meagher & Flom.
Once skeptical, Congress warms to Gensler [ID:nN19157730]
FACTBOX: Key comments on CFTC energy plan [ID:nN20118627]
FACTBOX: CFTC's proposed energy limits [ID:nN14182526]
GRAPHIC: CFTC path to reform
TAKE A LOOK: CFTC push for new position limits [ID:nCFTCREG]
TAKE A LOOK: U.S. Financial Regulation [ID:nN16148428]
(Reporting by Christopher Doering and Roberta Rampton;
Graphic by Jasmin Melvin; Editing by Russell Blinch and Jan