December 9, 2010
For years, I have been calling for speculative position limits. At first, I was the only one doing so at the CFTC.
In 2007 and 2008 we saw huge speculative investments in futures markets. We also saw commodity prices jump with wheat at $24 per bushel, gas over $4 a gallon and crude oil topping out over $147 per barrel. Studies at Oxford, Princeton, Rice and MIT all suggested an influence on price by speculators. Data I discussed yesterday for the first time shows that the positions of speculators in futures markets are at an all time high. The silver market, for example, where we have seen very large positions, now has huge speculative positions. People across the country wrote to their representatives in Washington calling for position limits. Congress heard them and mandated that we impose the limits in January of 2011.
Today, we still don't have a proposal before us from staff. Therefore, as my colleagues know, I was prepared to offer one. I appreciate the commitment of the Chairman, however, to bring to the Commission such a proposal next week, on December 16th. As the Chairman said, there would be two proposals—one for spot month contracts that would have an expedited implementation date, and another proposal to put into effect non-spot month limits and aggregate limits. Limits pursuant to the second proposal would be based upon adequate data.
So, I won't offer my position limit proposal now, and again thank the Chairman for his commitment to move forward next week.
Finally, on the SEF rule proposal, I want to ensure that any proposal meets the two separate objectives of the rules of construction for SEFs: to promote pre-trade price transparency and to promote trading of swaps on SEFs. Neither transparency nor promoting swaps trading on SEFs trumps the other in the law. They are co-equals and our final rule must reflect that. While I was prepared to support the proposal (which has now been delayed until next week), I appreciate that questions I added to the proposal would have allowed needed flexibility for the Commission to amend the proposal based upon the comments we receive.
Again, I appreciate the commitment of the Chairman and I look forward to consideration of position limit rules next week.
Last Updated: December 9, 2010