Statement of Commissioner J. Christopher Giancarlo on Proposed Rule for Position Limits for Derivatives
December 5, 2016
Since taking my seat on the Commission, I have traveled to well over a dozen states where I met with many family farmers and toured numerous energy utilities and manufacturing facilities. I have heard the concerns of agriculture and energy producers and consumers about market speculation and the role of position limits.
I have always been open to supporting a well-conceived and practical position limits rule that restricts excessive speculation. That is so long as it protects the ability of America’s farmers, ranchers and processors to hedge risks of agricultural commodities and the ability of America’s energy producers and distributors to control risks of energy production, storage and distribution.
That is why I believe it is so important to carefully consider the impact of this very complex rule on America’s almost nine thousand grain elevators,1 two million family farms2 and 147 million electric utility customers.3 That is why I support putting out this rule as a proposal.
My concern regarding previous earlier proposals has been that they would restrict bona fide hedging activity or harm America’s agriculture and energy industries that have been sorely impacted by plummeting commodity prices and service provider consolidation. I am simply not willing to support a poorly designed and unworkable rule that ever after needs to be adjusted through a series of no-action letters and ad hoc staff interpretations and advisories that had become too common at the CFTC in prior years.
While some may view position limits as the “eternal rule,” I disagree. The current proposal is very detailed and highly complex. It is over 700 pages in length and has over one thousand footnotes. In some areas, concerns expressed by market participants regarding the 2011 rule that was struck down by the court and the 2013 proposal have been well addressed. In other areas, they do not appear to have been as well addressed.
Notably, the proposal introduces a series of new estimates of deliverable supply that have not been previously presented to the public. It also incorporates concepts introduced in the 2016 supplemental proposal. Given these new additions and the complexity of the proposal, one more round of public comment is appropriate.
I feel comfortable that the proposal before us provides the basis for the implementation of a final position limits rule that I could support. I commend the staff responsible for this proposal for all their hard work in making the significant improvements that are before us. I also extend my gratitude to Chairman Massad and Commissioner Bowen for agreeing to put this proposal before the public for comment.
I welcome commenters’ views on the proposal. I expect that with their added insight we can finalize a position limits rule in 2017 that is workable and does not undo years of standard practice in these markets.
1 U.S. Grain Storage Data, National Grain and Feed Association website (last visited Dec. 5, 2016), https://www.ngfa.org/news-policy-center/resources/grain-industry-data/.
2 News Release, Family Farms are the Focus of New Agriculture Census Data, U.S. Department of Agriculture, Mar. 17, 2015, http://www.usda.gov/wps/portal/usda/usdamediafb?contentid=2015/03/0066.xml&printable=true.
3 2015-2016 Annual Directory & Statistical Report, American Public Power Association, at 26 (2016), http://www.publicpower.org/files/PDFs/USElectricUtilityIndustryStatistics.pdf.
Last Updated: December 20, 2017