Commodity Position Limit Rules Should Be Based on a Finding of Necessity

According to a Commodity Futures Trading Commission (CFTC) official, the CFTC will unveil new speculative commodity position limits soon. Energy Risk magazine reported that CFTC Commissioner Scott O’Malia had stated in mid-May that the rules should be released within the next six weeks. Energy Risk also noted that Commissioner O’Malia “appeared skeptical that the CFTC would be able to craft a rule that would survive further court scrutiny.” On 28 September 2012, a federal court had struck down the agency’s previous efforts to impose speculative position limits because the CFTC did not explicitly demonstrate that its rules were “necessary and appropriate.” Can one successfully make the case that “excessive speculation” caused price spikes in various commodity markets recently? If one could make this case, then presumably the CFTC could demonstrate that speculative commodity position limits are indeed “necessary and appropriate.”