CFTC appeals court decision to halt derivatives rules

The Commodity Futures Trading Commission (CFTC) has decided to appeal a court ruling that halted its efforts to implement new restrictions on derivatives trading.

By a 3-2 vote, the commission agreed to challenge a district court ruling that vacated the regulator's efforts to implement a portion of the Dodd-Frank financial reform law setting limits on the amount of positions a trader could hold in various commodities. These position limits are aimed at curbing speculative trading in commodities markets.

"The rule addresses Congress’ concern that that no single trader be permitted to obtain too large a share of the market, and that derivatives markets remain fair and competitive," said CFTC Chairman Gary Gensler Thursday. "I believe it is critically important that these position limits be established as Congress required. I support the Commission's continued efforts to put in place position limits on speculative positions by appealing the September ruling."

A U.S. District Court judge in September vacated CFTC rules on the limits.

The rules would have set limits on the amount of positions a particular trader could hold in 28 different commodities. Two industry trade groups, the Securities Industry and Financial Markets Association (SIFMA) and International Swaps And Derivatives Association (ISDA), filed the legal challenge that led to the rules being vacated.

Judge Robert Wilkins said the CFTC failed to determine if the new regulations were necessary and appropriate before going forward, and punted the rulemaking back to the regulator. The decision marked a last-minute victory for the financial industry, as the limits were set to begin on Oct. 12.

---