WASHINGTON (Reuters) - The United States set out on Tuesday with its toughest measures yet to curtail speculation in commodity markets, likely shifting the focus of a fierce four-year debate from the regulators to the courts.
In a measure decried by Wall Street and trading companies as a misguided political attempt to cap soaring oil and grain prices, the Commodity Futures Trading Commission set out its rule on "position limits" that will cap the number of futures and swaps contracts that any single speculator can hold.
The final rule, due to be voted on after the commission meets from 9:30 a.m. EDT, will be a relief to many in the industry as it relents on several key provisions that were heavily criticized, as Reuters reported last month.
That included tough measures on whether separately controlled accounts must be aggregated and whether swaps and futures positions can be offset, so-called "class limits", the CFTC said. It also partly yielded to CME Group calls for equal treatment of cash and physical contracts.
But giving ground on those details will do little to temper deep frustration over a contentious plan that could force banks such as Morgan Stanley and industry traders like grains giant Cargill to scale back business, stemming an influx of investor capital. The CFTC estimated the measure would cost the industry about $100 million in the first year.
"The Wild West of exempting traders from any concentration levels whatsoever ends now," Bart Chilton, a CFTC commissioner and a staunch supporter of the limits, told Reuters.
A lawsuit to stop the measure coming into force seems likely, say industry experts and lawyers, one more hurdle for CFTC Chairman Gary Gensler, who is struggling against emboldened Republicans and a hostile Wall Street to put in place the rules required by the Dodd-Frank financial reforms.