Letter to the Honorable Timothy Massad, Chairman of the Commodity Futures Trading Commission - Failure to Finish Rule to Curb Excessive Speculation in Commodities

Letter

Dear Chairman Massad:

We write to address the Commodity Futures Trading Commission's (CFTC) reproposal of regulations to implement limits on speculative futures and swap positions as required by the Dodd-Frank Wall Street Reform and Consumer Protection (Dodd-Frank) Act. Through the Dodd-Frank Act and the Commodity Exchange Act, Congress has called for the use of speculative position limits as a means of preventing unreasonable and unwarranted price fluctuations and has directed the CFTC to establish position limits with the goal of diminishing, eliminating, or preventing excessive speculation and to deter and prevent market manipulation.

We are disturbed by the CFTC's action to delay this rulemaking and your inability to guide the rule to completion in the two and a half years of your tenure. Instead of working to achieve a balanced rule based on years of consideration and comments since the November 2013 reproposal of the rule, you have simply kicked the issue into the future and created the uncertainty that you stated you were trying to avoid.

In March, we wrote to you expressing our concern that the final position limits rule would be delayed or weakened. When the CFTC approved the supplemental position limits proposal in May, your statement concluded with "I look forward to hearing the views of market participants and completing a position limits rule this year." Now, in December, we see that our concerns were well founded -- the rule has been unnecessarily delayed and is now on track to be weaker.

Moreover, the rule on position limits is not the only disappointment from the CFTC. Throughout this year, we have witnessed the CFTC delay or weaken the finalization of the de minimis exemption from swap dealer registration, capital and liquidity rules for swap dealers, margin requirements for uncleared swaps, and your own regulation on automated trading. You have also used your position to criticize several rules that the Federal banking agencies have implemented over the past six years that have made the financial system safer and more sound.

News reports have indicated you will step down at the beginning of 2017. Given your comments on December 6 that, "there's a wide consensus that the reforms made to bring transparency and oversight to the swaps market made sense, and therefore it would be a mistake to significantly change them," we urge you to spend your remaining time putting the CFTC in a position to finalize strong Dodd-Frank rules for the derivatives market as contemplated by Congress.

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