Congressman Barney Frank today announced that the U.S. District Court for the District of Columbia has agreed to permit filing of an amicus brief submitted by House Democrats concerning the ability of the Commodities Futures Trading Commission to issue rules which would limit speculation in commodities markets.  In their formal submission to the Court, Democrats state that the clear intent of Congress in enacting the 2010 Wall Street Reform and Consumer Protection Act of was to require the Commodities Futures Trading Commission (CFTC) to establish rules setting position limits on trading commodities futures and swaps.

The CFTC is an independent federal agency whose mission is to protect investors and the public from fraud in the market for commodity futures and options. Position limits are considered an effective tool for maintaining stable markets and for restricting excessive speculative trading.  Many economists believe that speculation involving large oil futures position limits and swaps by entities that don’t use oil contributes significantly to the high cost of gasoline.

The Democratic brief is a response to a lawsuit brought by industry trade associations and lobbying groups. The lawsuit argues that the CFTC lacks authority to promulgate rules setting position limits before first conducting cost benefit analyses on a case-by-case basis.

The amicus brief submitted by House Democrats strongly rebuts the industry’s central claim, arguing that the unambiguous intent of Congress in the Wall Street Reform Act was to instruct the CFTC to set position limits.

In response to the action by the U.S. District Court, Congressman Barney Frank issued the following statement:

This brief, signed by every Member of the House who voted in conference for the Financial Reform Bill and still serves in Congress, is a clear repudiation of claims by the industry that the move by the CFTC to restrict speculation is a violation of Congressional intent.  Some legal issues are very complicated – not here.  This argument can be summarized easily – industry claims that those of us who wrote the Wall Street Reform and Consumer Protect Act did not intend the regulators to restrict speculation.  This brief is our answer – “yeah, we did.”