Senators File Amicus Brief Supporting Mandatory Trading Limits to Combat Excessive Speculation and High Gasoline Prices
Friday, April 13, 2012
WASHINGTON—Nineteen U.S. senators filed an amicus brief [pdf] in federal court this morning to support action taken by the Commodity Futures Trading Commission (CFTC) to impose trading limits on speculators in U.S. commodity markets to combat excessive speculation and combat high prices for gasoline, crude oil, food, and other commodities.
“High gasoline prices are choking our economic recovery,” said Sen. Carl Levin (D-MI), who spearheaded the effort on the brief. “Oil supplies are plentiful and demand is down, so high gas prices can’t be explained by ordinary market forces of supply and demand. An ongoing contributing factor is excessive speculation in U.S. commodity markets. Two years ago, the Dodd-Frank Act directed the CFTC to clamp down on excessive speculation by imposing trading limits on speculators, and the CFTC issued a new regulation to do just that. The financial industry slapped the CFTC with a lawsuit claiming Congress never meant for the trading limits to prevent excessive speculation to be mandatory, but our amicus brief shows that is exactly what we meant and what the law requires.”
In the brief, the Senators wrote: “After seven years of Congressional studies finding excessive speculation and price manipulation in the commodities markets due in part to regulatory loopholes and CFTC waivers of position limits, Dodd-Frank was designed and intended to make those position limits mandatory.” The brief also stated that, in the law, “Congress repeatedly referred to the limits as ‘required’ because it intended to make them so. Had Congress intended to make position limits discretionary, it is inexplicable that it would have referred to them as ‘required’ rather than, for example, as ‘permitted’ or ‘authorized.’”
The amicus brief was filed by Senators Levin, Mark Begich (D-AK), Richard Blumenthal (D-CT), Barbara Boxer (D-CA), Sherrod Brown (D-OH), Maria Cantwell (D-WA), Ben Cardin (D-MD), Dianne Feinstein (D-CA), Tom Harkin (D-IA), Patrick Leahy (D-VT), Joe Manchin (D-WV), Claire McCaskill (D-MO), Robert Menendez (D-NJ), Barbara Mikulski (D-MD), Bill Nelson (D-FL), Bernie Sanders (I-VT), Jeanne Shaheen (D-NH), Sheldon Whitehouse (D-RI), and Ron Wyden (D-OR). It was filed in a lawsuit brought by two industry groups, the International Swaps and Derivatives Association (ISDA) and the Securities Industry and Financial Markets Association (SIFMA) to block the CFTC from implementing a new regulation to impose position limits on speculators who trade 28 commodities on U.S. markets.
The industry lawsuit asks the court to impose a preliminary injunction to suspend the regulation immediately and summary judgment to invalidate it permanently. The court has not yet ruled on either motion.
The amicus brief concentrates on a single issue: demonstrating that the Dodd-Frank Wall Street Reform and Consumer Protection Act made imposing position limits on speculators mandatory, not discretionary. It discusses the plain language of the law, its legislative history, and seven years of Senate investigations and legislative efforts to combat excessive speculation, in part, by imposing mandatory trading limits on speculators.
Position limits, which have been part of U.S. commodities law since 1936, are a recognized tool to reduce and prevent excessive speculation and price manipulation in commodity markets.
The case is in the U.S. District Court for the District of Columbia, International Swaps and Derivatives Association v. Commodity Futures Trading Commission, Civil Action No. 1:11-CV-2146-RLW.