October 10, 2013

New CFTC Proposal Could Harm Markets, Main Street

Hester Peirce

Former Senior Research Fellow
Summary

The Commodity Futures Trading Commission is reportedly drafting a new proposal that would implement tighter position limits in commodities markets. Mercatus Center senior research fellow Hester Peirce, former counsel at the Securities and Exchange Commission, responded to the news.

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The Commodity Futures Trading Commission is reportedly drafting a new proposal that would implement tighter position limits in commodities markets. Mercatus Center senior research fellow Hester Peirce, former counsel at the Securities and Exchange Commission, responded to the news.

"While it is difficult to assess what the CFTC is doing without seeing the rule, this appears to be yet another example of the CFTC making rules to make a public statement rather than to make good public policy. In this case, the public statement is that the CFTC will not let an adverse court ruling get in the way of rules that have the potential to damage the markets and the Main Street companies, farmers, and investors that rely on them."

Peirce has previously written about the regulatory role of the CFTC—which was greatly expanded under the Dodd-Frank law—and how its rush to write new rules will loom large for the next chairman, with current Chairman Gary Gensler stepping down at the end of the year.

"The large volume and rapid pace of rulemaking during Chairman Gensler's tenure does not mean that the incoming chairman can sit back, relax, and watch the new regulatory infrastructure do its magic. To the contrary, the new chairman will reap the consequences of a regulatory regime rushed into place. Many of those consequences remain to be uncovered by unwitting market participants."