John Damgard, president of the Futures Industry Association, today issued the following statement in response to the approval of two Dodd-Frank rulemakings by the Commodity Futures Trading Commission:
Regarding the position limits rule:
It is quite troubling to see that three out of the five CFTC commissioners have such serious reservations about this rule. Commissioner Dunn even went so far as to say that he has not seen “any reliable economic analysis” to support the contention that position limits are necessary or effective in preventing excessive speculation. At best, position limits are a cure for a disease that does not exist, according to Commissioner Dunn. At worst, they may harm the very markets they are intended to protect. I could not agree more with his comments.
Of particular concern to us is the potential adverse effect on commercial entities that use derivatives to hedge price risk. The comments by the CFTC commissioners at today’s meeting appear to indicate that the rule will make it more difficult if not impossible for these entities to use legitimate and well-established methods for hedging their risks.
Regarding the DCO rules:
It is too early to tell what the massive clearing rulebook means. But our initial concern is that the rules seem too prescriptive. The science of risk management continues to evolve rapidly and risk exposures can change drastically in a very short period of time. We hope that this rule will not interfere with the ability of clearinghouses to adjust their risk management policies and procedures as they see fit.