Scott Eells/Bloomberg NewsGary Gensler, chairman of the Commodity Futures Trading Commission.
A divided Commodity Futures Trading Commission on Tuesday adopted new constraints on speculative Wall Street trading, a business that some regulators have blamed for inflating prices at the gas pump and the grocery store.
But the fight over the rule may continue if Wall Street, as expected, takes its complaints to the courts.
The commodity commission, facing threats that the financial industry will sue to block the overhaul, agreed to delay many new limits for at least a year. The agency also exempted some trades altogether, leaving consumer advocates calling for a tougher crackdown.
The so-called position limits rule will cap the number of derivatives contracts a trader can hold on 28 commodities, affecting dozens of traders who now exceed the new limits. The limits will cover an array of goods — oil, wheat, gold and the like — the first time federal authorities have reined in speculative trading in both energy and metals.
“Position limits help to protect the markets both in times of clear skies and when there is a storm on the horizon,” Gary Gensler, the agency’s chairman, said at a public meeting in Washington.
The much-anticipated rule was approved by a 3-2 vote. Three Democratic members approved the rule over the vocal objections of two Republican colleagues.
Scott O’Malia, a Republican member, said he was disappointed by the rule. “Unfortunately, in its exuberance and attempt to justify doing so, the commission has overreached.”
The limits will not take effect anytime soon. Caps on most trading will kick in 60 days after the agency completes a related rule, which is likely to take months. Other commodities will escape the restrictions for at least a year.
The position limits plan has emerged as one of the most contentious rules stemming from the Dodd-Frank act. The Commodity Futures Trading Commission was inundated with letters about position limits — 15,000 comments in total.
Wall Street trade groups were especially vocal. Some industry lobbyists note that Dodd-Frank leaves it to regulators to enforce position limits only “as appropriate.” The groups pushed regulators to interpret the fine print to mean that, in fact, no limits were appropriate.
Other groups even issued thinly veiled threats of legal action. In March, the Futures Industry Association urged the commission to scrap its position limits plan, saying it “may be legally infirm.”
The threats have resonated at the agency in the wake of a court ruling this summer that struck down a separate Dodd-Frank rule at the Securities and Exchange Commission. After the ruling, the commodity commission revamped the position limits rule to better account for the regulation’s costs and benefits.
But Mr. O’Malia said the cost-benefit section was still not up to snuff, leaving the rule “vulnerable to legal challenge.”
Mr. Gensler, however, praised the rule as the nation’s best hope for reining in speculative commodities trading. Over the last few years, the financial industry has increased its speculation in the futures market. At the same time, the prices of the underlying commodities have fluctuated wildly.
Consumer groups and some regulators have faulted excessive speculation for driving a spike in oil and gas prices, saying Wall Street is driving up costs for consumers.
Industry groups contend that speculators are needed to keep liquidity flowing. They also argue that regulators lack data tying speculative trading to price distortions, concerns echoed by Republican regulators.
While the agency has enforced position limits on a handful of agricultural goods for decades, the sprawling new rules apply to 28 commodities, including metal and energy commodities. Existing position limits apply to only nine items.
The new rule adopted on Tuesday would enforce spot-month position limits, or limits on a contract closest to maturity, prohibiting traders from acquiring more than 25 percent of the deliverable supply for a given commodity. For other contracts, the agency will phase in position limits over time, once it gathers additional data.
But some consumer advocates say the rule is not tough enough. It exempts broad ranges of trades placed as hedges against risk and allows firms that trade in certain natural gas contracts to face lighter limits. The final rule did close an earlier loophole that would have relaxed position limits for trades settled with cash payments rather than by exchanging the actual commodity.
At the otherwise contentious meeting on Tuesday, the agency celebrated Mr. Gensler’s 54th birthday, singing “Happy Birthday.”
Mr. O’Malia, saying he would vote against the rule, told Mr. Gensler “You are old enough to know that you don’t get everything you want.”
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