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CFTC considers raising position-limits threshold

The Commodity Futures Trading Commission may ease regulations that limit speculation on commodities, including wheat, oil and natural gas.

The commission’s five member panel is debating a private vote that would alter the way that firms combine trading positions when that firm has ownership in other companies, according to four people familiar with the matter. The commission may suggest an increase from 10 percent to 50 percent the threshold used when a company is considered to have ownership and must combine trading positions, Bloomberg reports.

The change would alter position limits rules finalized by the CFTC in October. The position limits cap the number of contracts any one trader is permitted, ultimately restricting the ability of traders to have positions in excess of set limits due to control of multiple accounts. The rules instigated a lawsuit by the Securities Industry and Financial Markets Association and International Swaps and Derivatives Association Inc., both of which seek to repeal the measure.

In response to comment from lobbying groups representing major energy and agricultural firms, including ConocoPhillips and Cargill, Inc., the CFTC will consider revising the position-limits rules.

“Absent actual relief from the aggregation requirements of the position limit rules, commercial firms likely will have to significantly reorganize their existing commercial operations,” the Working Group of Commercial Energy Firms said in January, according to Bloomberg. “These actions may include the restructuring or disposition of investments in joint ventures.”

Marcus Stanley, the policy director for Americans for Financial Reform, said that the current position limits are already weak, adding that raising the threshold will further water down the provision.

“This change goes in the wrong direction,” Stanley said, Bloomberg reports. “The position limit rule already has serious weaknesses that could permit excessive speculation. Loosening the aggregation rules would weaken it still further.”

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