In a flurry of announcements, congressional testimony and speeches in early summer, the CFTC let it be known that they are not your father’s futures regulator. Despite a regulatory structure that appeared up to the task in the recent credit market turmoil, new CFTC Chairman Gary Gensler stated, “We must aggressively use all existing authorities to ensure market integrity.”
On July 7, Gensler announced that the CFTC would hold hearings to study imposing position limits in the energy markets similar to those in agricultural markets. He also promised to continue the review of what qualifies as “bona fide hedging transactions or positions.”
The announcements, while not promising definitive action, caught the attention of mainstream media and appeared to facilitate sharp declines in CME Group and Intercontinental Exchange (ICE) stock prices.
In a statement, Futures Industry Association (FIA) President John Damgard said, “FIA would be concerned by any measures to bar legitimate participants from these markets or that would make it less efficient for U.S. corporations to use futures as a tool for managing price risk.”
Paul Zubulake, senior analyst at Aite Group, says similar position limits should be applied to OTC markets. “Without anything on the OTC side at the same time, it doesn’t make any sense,” he says.