Sen. Joseph Lieberman (I-CT) on Friday introduced legislation that would set position limits on all food- and energy-related contracts held by financial speculators, including over-the-counter (OTC) holdings and futures positions on foreign exchanges.
"The bill will reduce excessive speculation by...eliminating the exemptions that apply to investors that are not taking physical delivery of food and energy commodities. The bill applies the position limits if the position is not related to a bona fide hedging activity," a summary of the measure said. The bill was introduced as crude oil prices reached a record high of $147/bbl Friday. Other sponsors of the bill are Sens. Susan Collins (R-ME) and Maria Cantwell (D-WA).
"We need to establish a clear, bright line in the oil and gas markets from possible market manipulation. The American public and businesses are being crushed by out-of-control oil prices and need Congress to rein in excessive speculation and bring these markets back under control," Cantwell said.
The bill also calls for the Commodity Futures Trading Commission (CFTC) to set speculative position limits, not the futures exchanges; and would require the CFTC to establish individual position limits at levels to prevent excessive speculation in the markets.
Moreover, the measure would repeal the authority that permits the CFTC to substitute reporting requirements for actual speculative position limits; require foreign futures exchanges to provide the CFTC with daily trading information similar to the information provided by domestic exchanges; and would provide additional funding for the CFTC to hire 100 more full-time employees.
In a related development, Sens. Carl Levin (D-MI) and Dianne Feinstein (D-CA) Friday introduced a bill that would give the CFTC new authority to police individual traders in non-electronic exchange OTC markets. "This bill will shine the bright light of transparency in the over-the-counter energy markets," Feinstein said.
Both Levin and Feinstein sponsored legislation to close the Enron loophole, passed by Congress in May, to place electronic OTC exchanges under CFTC regulation. However, they said that the new law did not cover trading in the broader non-electronic OTC market, which includes bilateral trades through brokers, swap dealers and direct party-to-party negotiations. These types of trades have traditionally taken place without CFTC oversight, Levin and Feinstein said.
It's not clear whether the Senate will be able to take up these or other CFTC-related bills before departing for its August recess. House Speaker Nancy Pelosi (D-CA) said she expects the House to act on legislation addressing energy speculation before the recess (see related story).
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