Lawyers for two powerful trade groups seeking to overturn the US Commodity Futures Trading Commission's position limits rule are claiming an agency proposal to relax portions of the rule is an admission that the rule is flawed.
The CFTC proposal is a "tactic concession that the Position Limits Rule, promulgated just seven months ago, was flawed," the lawyers for the International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association wrote in court papers filed Monday in the US District Court for the District of Columbia.
ISDA and SIFMA filed suit in the same court to overturn the limits in December, about two months after the agency approved the final rule in a partisan 3-2 vote.
The CFTC Friday unveiled a proposal that will require certain firms to count the positions of an affiliate against the overall limits if it owns more than 50% of the affiliate. The commission had originally set this ownership threshold at 10%.
In their filing this week, lawyers for ISDA and SIFMA called the proposed change, subject to a 30-day public comment period, a "positive development," but said it would "do nothing to fix the serious decision making flaws that lie at the heart of the [position limits rule.]"
"Even if the [CFTC] puts in place a less draconian aggregation standard, it has still failed to offer a reasonable explanation for the need for position limits for the specific commodity contracts it chose to regulate and why the particular levels it selected were necessary and appropriate," the lawyers wrote.
In a response Monday, lawyers for the CFTC filed court papers that said the proposed change to the position limits regime was in response to a petition filed by the Working Group of Commercial Energy Firms and "not in recognition of any shortcoming in the [rule.]"
The rule demonstrates that the CFTC "is always willing to consider suggestions for modifications to the Rule, but will adopt those modifications only if they help ensure that the Rule achieves Congress' goals," the commission's lawyers wrote.
On Tuesday, Judge Robert Wilkins denied an order for a hearing on the case that lawyers for SIFMA and ISDA had requested last week, according to court records.
