The U.S. Commodity Futures Trading Commission will appeal ajudge's ruling that rejected efforts to curb speculativederivatives trading after the 2008 financial crisis.

The commission filed a notice of appeal today in federal courtin Washington, seeking to ask a three-judge panel to reverse aruling by U.S. District Judge Robert Wilkins that said the CFTCfailed to assess whether limiting the number of contracts a tradercan have in oil, natural gas or other commodities was necessary andappropriate.

“The rule addresses Congress's concern that that no singletrader be permitted to obtain too large a share of the market, andthat derivatives markets remain fair and competitive,” CFTCChairman Gary Gensler said in a statement today. “I believe it iscritically important that these position limits be established asCongress required.”

The decision, which blocked rules scheduled to take effect Oct.12, was a victory for two Wall Street groups that challenged theconstraints imposed under the 2010 Dodd-Frank Act. The SecuritiesIndustry and Financial Markets Association and International Swapsand Derivatives Association Inc., in one of the financialindustry's highest-profile efforts to weaken Dodd-Frank, sued intwo federal courts in Washington in December.

The case is one of several brought by the financial industry asit pushes back against tighter regulations passed after the 2008credit crisis. On Nov. 8, CME Group Inc., the world's largestfutures market, sued the commission challenging cleared-swapsreporting requirements imposed under Dodd-Frank.

The CFTC voted 3-2 to appeal the speculation limits ruling,according to Steve Adamske, the agency's spokesman.

“Regrettably, instead of taking the opportunity to revise itsflawed reading of the statute, the commission has decided to doubledown on its no-justification-needed stance by appealing thedistrict court's ruling,” Scott O'Malia, one of two Republicans onthe commission, said in a dissent released today.

The commission estimated that the limits would affect 85 energytrading firms, 12 metals traders and 84 traders of certainagricultural contracts.

Commodity Futures

The limits applied to 28 physical commodity futures and theirfinancially equivalent swaps including contracts for corn, wheat,soybeans, oats, cotton, oil, heating oil, gasoline, cocoa, milk,sugar, silver, palladium and platinum.

The rule called for traders to aggregate their positions, achange that may have affected large firms with multiple strategies.It also would have tightened an exemption allowing so-called bonafide hedgers to exceed the caps.

“Our appeal should also send a message that the largestspeculators in the world can't litigate regulators to death,” saidBart Chilton, one of three Democrats on the CFTC and a supporter ofthe trading curbs. “Your deep pockets can't protect you from whatthe law clearly states.”

The rule is among the most controversial provisions ofDodd-Frank, and spurred more than 13,000 public comments to theCFTC from supporters including Delta Air Lines Inc. and opponentssuch as Barclays Plc. The agency voted 3-2 at an Oct. 18, 2011,meeting to approve the final regulation, with its two Republicancommissioners voting in opposition.

The associations that sued represent JPMorgan Chase & Co.,Goldman Sachs Group Inc., Morgan Stanley and other banks andenergy-trading firms.

The case is International Swaps and Derivatives Association v.U.S. Commodity Futures Trading Commission, 11-02146, U.S. DistrictCourt, District of Columbia (Washington).

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