Court Blocks Limit on Derivatives Speculation

Federal judge rules more study required before position limits are imposed.

U.S. efforts to curb speculative derivatives trading in the wake of the 2008 financial crisis were blocked by a federal judge, who ruled that regulators botched the process used to put new limits in place.

Less than two weeks before curbs were set to take effect, U.S. District Judge Robert Wilkins in Washington ruled that the 2010 Dodd-Frank Act required more study before setting caps on positions in oil, natural gas, wheat and other commodities. The Commodity Futures Trading Commission failed to first assess if the rule, slated to take effect Oct. 12, was necessary and appropriate under the law, the judge ruled yesterday.


The limits, completed in a 3-2 vote on Oct. 18, 2011, applied to 28 physical commodity futures and their financially equivalent swaps including contracts for corn, soybeans, oats, cotton, heating oil, gasoline, cocoa, milk, sugar, silver, palladium and platinum. Republican commissioners Jill E. Sommers and Scott O’Malia opposed the rule.

Failed the Challenge

“President Obama’s hand-picked CFTC chairman has repeatedly failed to enforce existing regulations, and now he’s failed the first challenge to a regulation he authored,” said Senator Richard Shelby of Alabama, the top Republican on the Banking Committee. “The last thing our struggling economy needs is more regulation without justification.”

Page 1 of 3

Copyright 2016 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


Advertisement. Closing in 15 seconds.