Senators Urge Regulators to Act on Speculative Trading Limits

Senators have urged "swift action" from regulators to curb speculation in gas and oil markets, even as the price of gas has started to fall.

"We are deeply concerned that the ongoing work to develop regulations implementing the Dodd-Frank derivatives provisions leaves our energy and oil markets operating without sufficient protections against excessive speculation or its effects," Sens. Dianne Feinstein (D., Calif.), Olympia Snow (R., Maine), Carl Levin (D., Mich.), Tom Harkin (D., Iowa), and Maria Cantwell (D., Wash.) wrote in a letter dated May 15.

The letter was sent to the Commodity Futures Trading Commission and the Securities and Exchange Commission, the regulators charged with writing new rules to fulfill the market overhaul that Congress set in motion with the 2010 Dodd-Frank financial-regulatory law.

The CFTC has finished the speculative limits, but they won't fully go into effect until regulators finalize definitions for key terms laid out in the law.

The limits are also being challenged in court by two trade groups, the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association, on the grounds that regulators didn't show that the limits were necessary and underestimated the costs to the industry.

The CFTC passed limits on speculative positions in October on a 3-2 vote along party lines. The new limits have long been a target of trade groups and the futures industry, and the agency's proposed rule prompted about 15,000 comment letters.

The rule aims to cap the positions firms can take in certain commodity contracts in order to curb sharp price increases. It gained traction in Congress during an oil-price spike in 2008, which some attributed to excessive speculation by short-term traders.