Comment Text:
December 2, 2010
David Stawick
Secretary
United States Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, D.C. 20581
Notice of Proposed Rulemaking RIN 3038-AD17
Position Reports for Physical Commodity Swaps
Dear Mr. Stawick:
The Petroleum Marketers Association of America (“PMAA”) and the New England Fuel Institute (NEFI) are pleased to submit this letter to the Commodity Futures Trading Commission (“CFTC” or “Commission”) on its Notice of Proposed Rulemaking RIN 3038-AD17 regarding Position Reports for Physical Commodity Swaps.
PMAA is a national federation of 47 state and regional trade associations representing over 8,000 independent petroleum marketing companies. These companies own 60,000 convenience store/gas stations and supply gasoline and diesel fuel to an additional 40,000 stores. Also, PMAA member companies sell 90 percent of the heating oil consumed in the United States. PMAA representatives have frequently testified before the Commission and before Congress on matters relating to the regulation of energy commodities and derivatives on energy commodities. Also joining PMAA in these comments is the New England Fuel Institute. NEFI is a member of the Petroleum Marketers Association of America, and an independent trade association representing the home heating industry since 1950. NEFI represents over 1,000 home heating oil and propane retailers and related service companies in New England and throughout the northeastern United States, most of which are small, multi-generational family owned- and operated-businesses
PMAA and NEFI have commented to the Commission on a number of occasions, regarding 2008-09 financial market crises, and the harm caused as a result of excessive speculation. The Dodd-Frank Act acknowledges the potential harm of excessive speculation and has reaffirmed the importance of position limits by providing the Commission with expanded authority to impose such limits on currently unregulated markets and to establish position limits for swap dealers. This authority, when expressed in a final rule, will prevent a dominant trading firm or firms whose position(s) constitutes a large share of overall trading, from inducing volatility in the market which would have adverse impact on other market participants.
PMAA and NEFI believe it is of great importance that the CFTC establish position limits for designated contract markets (DCMs), physical commodity futures contracts and swaps that are economically equivalent to such contracts with utmost haste. We believe that this interim rule will provide the data and establish reporting requirements the purpose of which will be to provide a solid empirical foundation for setting effective position limits on heretofore unregulated activities.
As articulated by CFTC Chairman Gary Gensler in his supporting statement,
“The Commission currently receives, and uses for market surveillance purposes, including position limit enforcement, data on large positions in physical commodity futures and option contracts traded on DCMs. However, there is no analogous reporting structure in place for economically equivalent swaps, which until recently were largely unregulated financial contracts. The Commission’s proposal would require position reports on economically equivalent swaps from clearing organizations, their members, and swap dealer (Federal Register, 11/2/10).
We appreciate the opportunity to comment on this proposed rule.
Sincerely,
Dan Gilligan Shane Sweet
PMAA President NEFI President & CEO
