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US futures commission proposes energy speculation limits

[JURIST] The US Commodity Futures Trading Commission (CFTC) [official website] on Tuesday announced [press release, PDF] plans to hold a public hearing on a series of regulatory reforms aimed at curbing excessive speculation in energy commodity markets. CFTC Chairman Gary Gensler [official profile] said that the different regulatory treatment given to agriculture commodities, for which the CFTC sets position limits, and energy commodities, for which position limits are set by the exchanges, "deserves thoughtful review." The Commission is considering extending CFTC trade volume limits to energy markets, in an effort to "ensure a fair and transparent price discovery process for all commodities." The commission is also examining whether the bona fide hedging transaction exemption in the Commidity Exchange Act [7 USC § 1 text], should continue to apply to transactions used to hedge purely financial risk, rather than risk "arising from the actual use of the commodity." Gensler said that the proposed reforms were a part of the Commission's "existing authorities to ensure market integrity."

Gensler was confirmed [remarks, PDF] as CFTC Chairman in May, at a time when the administration of US President Barack Obama [official website] is departing [CQ report] from the deregulatory attitude of the George W. Bush [official profile] administration. Last year, the US Senate [official website] rejected a bill [S 3268 text, PDF; materials] designed to amend the Commodity Exchange Act to prevent unchecked energy speculation. The House of Representatives [official website] passed [roll call] its own commodities reform [text, PDF] in September.

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