Bloomberg News

Wall Street Groups Seek to Delay CFTC Limits on Speculation

February 15, 2012

(Updates with judge setting hearing in fifth paragraph.)

Feb. 8 (Bloomberg) -- Two Wall Street groups asked a federal judge to delay a U.S. Commodity Futures Trading Commission rule that limits speculation, saying the regulation is already imposing “significant, irreversible costs.”

The International Swaps and Derivatives Association Inc. and the Securities Industry and Financial Markets Association filed a request yesterday with U.S. District Judge Robert Wilkins in Washington, urging him to put the rule on hold while he considers their legal challenge.

“Compliance efforts will include restructuring of corporate relationships and divestment -- irreversible changes in ownership,” Eugene Scalia, a lawyer for the groups, said in the filing. “These costs are being incurred now and will continue to rise absent a preliminary injunction, and they will be impossible to recoup if the rule is invalidated -- as it likely will be.”

The groups, in one of the financial industry’s highest- profile efforts to weaken 2010’s Dodd-Frank law, filed lawsuits in two federal courts in Washington in December challenging the rule setting caps on the number of contracts a trader can have.

Wilkins today ordered the commission to respond to the request by Feb. 17 and scheduled a hearing for Feb. 27.

Steven Adamske, a CFTC spokesman, didn’t respond to e-mail messages seeking comment on the groups’ filing.

The groups made an almost identical request to delay the rule with the U.S. Appeals Court in Washington, which dismissed the case after ruling it must first be considered by the district court.

Flawed Analysis

They argue that the CFTC used a flawed analysis of Dodd- Frank when it decided to impose the restrictions. The associations also said the CFTC failed to properly weigh the rule’s costs and benefits.

The two associations represent JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, among other banks and asset managers.

The rule is among the most controversial provisions of Dodd-Frank, and spurred more than 13,000 public comments to the CFTC from supporters including Delta Air Lines Inc. and opponents such as Barclays Capital. The agency voted 3-2 at an Oct. 18 meeting to approve the final regulation, with Jill E. Sommers and Scott O’Malia, both Republicans, voting in opposition.

The case is International Swaps and Derivatives Association v. U.S. Commodity Futures Trading Commission, 11-02146, U.S. District Court, District of Columbia (Washington).

--Editors: Michael Hytha, Douglas Wong

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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