The US Commodity Futures Trading Commission has no legal obligation to study the costs of its controversial commodity position limits rule and requiring it to do could imperil financial reform efforts, Better Markets argued in a court filing Monday.
In an amicus brief filed with the US District Court for the District of Columbia, the non-profit, financial reform advocacy group called it "inconceivable" that Congress would pass financial reform legislation following 2008's financial crisis only to have the reforms hinge on a rule-by-rule study of the costs to industry.
This, Better Markets argues, would ignore "the overriding purpose of the new regulatory framework" and would give "controlling weight to cost concerns from the very industry that precipitated the crisis."
Such an analysis would "imperil regulatory reform ... by forcing the CFTC to overcome high and unwarranted hurdles as it promulgates its rules" and would conflict the intent of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which mandated these limits.
"The CFTC has no obligation to quantify costs or benefits, weigh them against each other, or find that a rule will confer a net benefit before promulgating it," Better Markets told the court.
The filing is part of a lawsuit filed in December by the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association. The lawsuit centers on three arguments: that the CFTC needed to determine such limits were necessary before imposing them, that the agency did not present a "reasoned analysis" in setting the limits and that it did not conduct an "adequate" cost-benefit analysis of the rule.
In a court filing last week, lawyers for the CFTC argued that its 18-page cost-benefit analysis for the position limits rule was "more than sufficient" and lacks only an analysis of data market players were unwilling to provide.
US Senators, including 18 Democrats and Bernie Sanders, a Vermont Independent, and 17 Democrats in the House of Respresentatives, including Representative Barney Frank of Massachusetts, the co-architect of the Dodd-Frank Act, have filed amicus briefs arguing that position limits were a congressional mandate.
Lawyers for SIFMA and ISDA have filed a motion to block the CFTC from imposing the limits until the lawsuit is resolved. US District Court Judge Robert Wilkins has yet to rule on that motion.
