* CFTC advances position limits plan to comment stage
* Dunn: Needs more evidence of harmful speculation
* Dunn: Plan may be "cure for disease that does not exist"
* Gensler: Congress wants position limits for commodities
* Lawyer: room to argue both ways (Recasts and updates with analyst comments)
By Roberta Rampton and Sarah N. Lynch
WASHINGTON, Jan 13 (Reuters) - Big speculators could face curbs on wheeling and dealing in commodity markets after the U.S. futures regulator on Thursday advanced a plan to cap large positions, but internal dissent could delay final adoption of the plan for months or longer.
An important swing vote on the five-member Commodity Futures Trading Commission expressed skepticism about whether curbs on their trades would prevent a large run-up in prices.
"With such a lack of concrete evidence, my fear is that, at best, position limits are a cure for a disease that does not exist or at worst, a placebo for one that does," Commissioner Michael Dunn said at the opening of the hearing.
The plan, adopted in a 4-1 vote to allow it to move to the public comment stage, would attempt to curb positions investors can hold in commodity markets, with the aim of preventing large players from controlling the market.
Consumers and some lawmakers say it would prevent a run-up in prices, which hit record highs in 2008 in oil and many food staples.
But the surprisingly strong talk by Dunn, a Democrat, will add fuel to a debate about the role banks and funds play in energy, metals and agricultural markets, whose prices are soaring again.
His skepticism means a final rule on aggregate limits could be delayed, or even shelved, said Daniel Waldman, a partner with law firm Arnold & Porter, and a former general counsel at the CFTC.
"I thought it was an indication that there is a chance that the Commission may never have the votes to put these aggregate position limits in place," Waldman said.
HIGHLIGHTS-What CFTC officials said [ID:nN13246189]
FACTBOX-Position limit proposal [ID:nN09137318]
FACTBOX-Comparison of limits plans [ID:nN16213105]
ANALYSIS-"Position points" lack bite [ID:nN07191365]
Position limits PDF r.reuters.com/gan95r
FACTBOX-CFTC rule on swaps documentation [ID:nN13265098]
Take a Look [ID:nCFTCREG]
The CFTC has wrestled with the role of speculators as institutional investors, hedge funds and exchange-traded funds flocked to commodity markets.
But the CFTC's own economists have not been able to find a causal link between speculation and price volatility. One study, for instance, concluded that commodity index traders are not causing price volatility and may actually be helping to reduce it.
Another analysis of New York Mercantile Exchange data from 2000 to 2009 found that a regulatory policy shift from position limits to non-binding "accountability levels" had not changed energy price volatility.
Dunn said he wants "statistical or economic analysis" before the limit plan moves to a final vote sometime after a 60-day comment period yields what's expected to be a flood of responses from consumers and industry alike.
DUNN SEEN AS LINCHPIN
Without Dunn's support, it will be extremely difficult for Chairman Gary Gensler to finalize the rule.
He has support from Bart Chilton, a Democrat who has been the strongest proponent for limits.
Republican Commissioner Jill Sommers voted against the plan, which she called flawed, and her fellow Republican Scott O'Malia also raised questions about it, but voted for the plan to move forward to the comment stage.
Asked if the CFTC has any leeway in whether it needs to adopt limits, Gensler said he believes Congress wants the agency to move forward.
The Dodd-Frank financial reform law said the CFTC "shall" set the limits "as appropriate," creating the dissent.
"There's probably room to argue both ways," said Arnold & Porter's Waldman.
Philip McBride Johnson, a retired derivatives lawyer and a former CFTC chairman, said there may be only so much wiggle room in Dodd-Frank.
"I'm not sure the statute gives them much choice. It seems to me it's sort of a mandate from Congress to do it. But to the extent it's done with the best information, who can quarrel with that?" he said.
$4 GASOLINE COULD TURN UP THE HEAT
Ultimately, pressure from consumers and lawmakers will pressure the CFTC to put the limits in place, said Michael Greenberger, a former senior official at the agency, now a law professor at the University of Maryland.
"Americans may be facing $4 gasoline, and you may have food riots around the world," Greenberger said.
"If it is just a placebo, well, let's try the placebo. There's no harm going to be done to anyone," he said.
Senior Democratic senators have warned the agency to stand firm. "It has become increasingly clear that Wall Street seeks to use the rule-making process to eviscerate the new position limits," said a letter from Democrats including Maria Cantwell, Bill Nelson and Carl Levin to the CFTC on Wednesday. [ID:nN12234282]
But Republicans controlling the House have cautioned they want to put the brakes on many parts of the Dodd-Frank law, which gave the CFTC oversight of the over-the-counter swaps market, valued at $600 trillion globally.
CFTC FALLING BEHIND ON RULES
The law required the CFTC to have limits for energy and metals markets in place by January, a deadline the agency conceded it had to miss because it lacked data.
The hiccup in rolling out position limits was the latest sign of the agency is struggling under its broad mandate and lack of funding.
The CFTC had also planned to vote on implementing a final rule designed to limit banks' voting power in derivatives clearing and trading venues on Thursday, but the rule was yanked from the agenda a day earlier because some commissioners felt it went too far, and others worried it lacked teeth. [ID:nN12226125] (Additional reporting by Christopher Doering; Editing by Russell Blinch and Lisa Shumaker)