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CFTC being lobbied hard on positions limits rule

The Commodity Futures Trading Commission will vote on Oct. 18 on a proposed rule to limit the powers of individual traders by capping the percentage of contacts they can own in a given commodity.

Financial reform advocates say that a trader or bank that owns too much of a share in any given market is able to control the price of the market for its own purposes, TNR.com reports. Opponents of the rule do not think the
CFTC has done an appropriate cost-benefits analysis on its outcome.

The financial industry has lobbied hard against the rule.

The CFTC has received over 13,000 comment letters regarding the rule and has held 1,000 meetings to hear comments on the rule, mostly from large financial institutions, according to TRN.com.

The rule was a part of Dodd-Frank, but whether or not the CFTC’s final version will live up to its original intent is questionable due to the active lobbying campaigns against the rule and the makeup of the commission’s voting panel.

Currently, the CFTC is divided along party lines. The one potential swing vote, Commissioner Michael Dunn, was appointed and re-appointed by former President George W. Bush. Dunn has argued the rule lacks a proper assessment of its economic impact, indicating he will vote no, TNR.com reports.

“My guess is that when the actual rules are in place, it’s going to be underwhelming,” Brian Hurst, a principal of the hedge fund AQR Capital Management told The Economist, according to TRN.com.

Many financial experts are doubtful that the position limits rule will have a significant effect if it is approved later this month.

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