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Regulators Move to Rein In Speculative Trading

October 18, 2011, 2:13 pmLegal/Regulatory
Regulators Move to Rein In Speculative Trading

A divided Commodity Futures Trading Commission on Tuesday adopted new constraints on speculative Wall Street trading, a business that some regulators have blamed for inflating prices at the gas pump and the grocery store.

But the fight over the rule may continue if Wall Street, as expected, takes its complaints to the courts.

The commodity commission, facing threats that the financial industry will sue to block the overhaul, agreed to delay many new limits for at least a year. The agency also exempted some trades altogether, leaving consumer advocates calling for a tougher crackdown.

The so-called position limits rule will cap the number of derivatives contracts a trader can hold on 28 commodities, ensnaring dozens of traders who currently exceed the new limits. The limits will cover an array of goods — oil, wheat, gold and the like — the first time federal authorities have reined in speculative trading in both energy and metals.

“Position limits help to protect the markets both in times of clear skies and when there is a storm on the horizon,” Gary Gensler, the agency’s chairman, said at a public meeting in Washington.

The much-anticipated rule, approved by a 3-2 vote, split the agency’s commissioners. Three Democratic members approved the rule over the vocal objections of two Republican colleagues.

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