The top U.S. futures exchanges expressed confidence that a revised plan to clamp down on commodities market speculation will not unduly burden the market.
The comments on Wednesday by the chief executives of IntercontinentalExchange and CME Group were more optimistic than in the past, when exchanges, banks and other market participants sharply criticized the U.S. Commodity Futures Trading Commission’s plan.
The CFTC aims to propose position limits in energy and other commodity markets later this month, part of a broader push by the agency under the Dodd-Frank financial reform law to implement rules that will overhaul the $600 trillion over-the-counter derivatives market.
“Regulators are not in my opinion trying to limit the growth of the market,” ICE’s Jeffrey Sprecher said at a conference hosted by Goldman Sachs, adding he expects changes to be “evolutionary, not revolutionary.”
He said regulators are focused on making sure no entity can build a position so big that the entity’s failure would pose a risk to the financial system. The federal government was forced to bail out American International Group Inc (AIG.N) at the height of the financial crisis because of just such a failure.
Also on Wednesday, the European Commission unveiled similarly sweeping plans to tackle energy market speculation, and to clamp down on manipulation of the gas and power markets.
The CFTC withdrew an earlier position limit plan and has been crafting adjustments to take into account the Dodd-Frank legislation.
“In what we’ve seen so far, it does seem that the CFTC has tried to be sensitive to setting the limits at levels that are not going to be unduly burdensome or disruptive to market participants,” CME’s Craig Donohue told the conference.
Donohue said he remains concerned about specific elements of the limits plan, for example the lack of exemptions for swaps dealers.
“If the new proposal is somewhat akin to the old proposal, I’m not expecting it to have a major impact on our business,” he said. “Philosophically … we are opposed to it but we’re going to adjust to it and deal with it in whatever way we have to.”
Regulators considering the limits are trying to figure out how much trading takes place in the off-exchange swaps markets.
ICE’s and CME’s markets offer contracts that would be subject to the new limits.
