Commodity Prices Show Need for New Regs: Gensler

CFTC chairman cites Dodd-Frank derivatives rules' role in curbing speculation

Rising market prices underscore the need for Dodd-Frank Act derivatives rules to curb speculation in commodities such as oil, gold and natural gas, Commodity Futures Trading Commission Chairman Gary Gensler told lawmakers.

“Though the CFTC is not a price-setting agency, rising prices for basic commodities highlight the importance of having effective market oversight,” Gensler wrote in response to a May 11 letter from 17 senators seeking a CFTC plan for curbing crude-oil speculation. Gensler’s letter said he was writing on behalf of Commissioners Michael V. Dunn and Scott O’Malia.

Regulators and lawmakers have attempted to rein in speculation since 2008 amid concern that investors contributed to oil’s rise to a record $147.27 a barrel. The CFTC has proposed so-called position limits in agricultural, metals and energy derivatives, under rulemaking authority granted by Dodd- Frank, the regulatory overhaul enacted last year.

“American consumers are hurting, at the gas pump, at the grocery store, at their local bank, and it’s our responsibility as regulators to do all we can to the fullest extent of our authorities to ensure that the prices consumers pay are 100 percent fair and accurate,” Bart Chilton, one of three Democrats on the commission, said in a statement yesterday.

The CFTC has “ample basis” to proceed with limits on speculation in fuel commodities, starting with crude oil, the 17 senators wrote in their letter to Gensler.

“Congress gave the CFTC the power to rein in excessive oil speculation and the CFTC should use it,” Senator Maria Cantwell, a Washington Democrat, said in a statement released with the letter.

12,000 Comments
The agency’s proposal, approved on Jan. 13, prompted about 12,000 comment letters from supporters including Delta Air Lines Inc. and opponents such as Barclays Capital and Cargill Inc.

Dunn, a Democrat who voted to propose the limits, questioned whether speculation is affecting market prices.

“To date, CFTC staff has been unable to find any reliable economic analysis to support either the contention that excessive speculation is affecting the markets we regulate or that position limits will prevent excessive speculation,” Dunn said in a statement at the time.

O’Malia, a Republican, also approved proposing the rules in the CFTC’s 4-1 vote. Republican Commissioner Jill Sommers cast the only opposing vote.

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