The CFTC issued a final rule in November 2011, which follows through on legislation that was signed into law in July 2010, to once again allow supply and demand -- not financial interests -- to determine the price of oil and other energy products.

Although we would have preferred a stronger regulation, it is important to preserve it against attack and ensure it becomes imbedded in the overall CFTC regulatory and enforcement structure. Hopefully, over time and with more data, we will be able to improve it.

Highlights of the Final Rule

• Yields speculative position limits that are so large they will be ineffective in curbing excessive speculation in the oil-futures and swaps markets.

• Permits futures positions and swaps to be netted against each other, potentially allowing larger positions in either the futures or swaps markets.

• The CFTC will retain the current exemption for independent account controllers, which permits hedge funds and others that have multiple, independent portfolio managers to maintain separate position limits for each.

• Recognizing that while we’ve long urged the Commission to set separate, lower speculative position limits and the recent surge of passive, long-only funds was distorting the normal price-discovery functioning of the futures market, the CFTC suggests that “more analysis is required before the Commission would impose a separate position limit regime . . . for a group or class of traders” such as commodity funds.

Next Steps

We will continue to monitor implementation and look for opportunities to press for tighter controls. Thank you for your continued support.

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