CFTC sued by Wall St. Over Crackdown on Commodity Trading
Top trade groups in Wall Street on Friday launched another major legal assault on the largest overhaul in decades of U.S. financial regulations, suing to stop new regulations on commodity speculation.
In the lawsuit, which had already been expected given the fierce oppositions from large investment banks and traders, the trade groups said that the Commodity Futures Trading Commission’s rule to put a stop to unwarranted speculation in markets like gold and oil was flawed and “lacked a reasoned basis.”
The International Swaps and Derivatives Association, as well as the Securities Industry and Financial Markets Association, also pointed out that the agency did not conduct adequate cost-benefit analysis of the hard-hitting “position limits” plan, which they claimed would lessen liquidity and amplify volatility.
Conrad Voldstad, the ISDA Chief Executive, in a statement, said, “The evidence is overwhelming that position limits are, at best, unnecessary and may, at worst, negatively impact commodity markets and users. It has the potential to harm markets at a time when they can least afford it.”
The lawsuit, which is the first ever filed against a CFTC rule, was filed in a federal court in the District of Columbia. The trade groups also asked the D.C. Court of Appeals to hear the case. That court has already decided in favor with Wall Street against a ruling issued by the Securities and Exchange Commission earlier this year, the first part of the Dodd-Frank regulation to be shelved.
The attack from Wall Street comes as the Republicans and the financial sector step up their efforts in pushing back regulators who are trying to enforce the sweeping reforms of the Dodd-Frank Act. Their actions include starving the CFTC of much needed funds.