Comment Text:
Gary Gensler
Chairman
U.S. Commodity Futures Trading Commission
Three Lafayette Centre
1155 21St Street, N.W.
Washington, DC 20581
Dear Chairman Gensler,
I am extremely concerned by the continued efforts of Wall Street and the financial industry to undermine new limits on speculation in oil, food, precious metals and other commodity markets. I urge you to quickly and aggressively implement and enforce the position limits imposed by the Dodd-Frank Wall Street Reform and Consumer Protection act.
As you know, section 737 of the Dodd-Frank act directs the Commission to "establish limits on the amount of positions as appropriate, other than bona fide hedge positions, that may be held by any person". The legislation further directs that the limits be set "to diminish, eliminate, or prevent excessive speculation." In addition to position limits on specific persons, the Dodd-Frank Act also directed the Commission to establish limits on the aggregate number or amount of positions in contracts based upon the same underlying commodity that may be held by any group or class of traders. This includes banks like JPMorgan and it's affiliates and other similarly positioned institutions and their affiliates.
Congress directed the Commission to enact new and meaningful restrictions on the size of investors commodity holdings. By directing the Commission to establish aggregate limits on the positions held by any group or class of traders, Congress intended for the Commission to act aggressively to prevent the harmful and damaging effects of excessive, broad based speculation and/or manipulation in commodity markets.
It has become clear that Wall Street seeks to use the rulemaking process to circumvent and eviscerate the position limits. I urge you to reject dilution or delays in the enforcement of the new rules. I also urge you to reject requests to exempt broad categories of derivatives, or to broaden the definition of bona fide hedging to include investment-related hedging. Moreover, firms and investors should not be able to circumvent the limits by "disaggregating" the investments they make through different funds or entities they control. Please recognize that these requests are an effort to open a back door to the commodity markets for abuse by Wall Street insiders or powerful institutions.
A shocking example of abuse is contained in the contents of the (attached) March 1st, 2011 Bank Participation Report. Theodore Butler reports that it indicates that JPMorgan and it's associates have 25,000 CME contracts (125 million ounces) of silver sold short. This amounts to a concentration of 25% of annual world production and can not be interpreted as a position that is intended for legitimate trading purposes. Regulators know that concentration in any market is to be avoided. The whole thrust of commodity law goes towards preventing concentration. Section 737 of the Dodd-Frank Act provides the basis to prevent such market abuse.
I appreciate the steps that you have taken in implementing the reforms enacted in the Dodd-Frank Act. It is critical that these reforms are sufficient to reign in both manipulation of markets and excessive speculation and provide enforcement of this legislation which is designed to prevent concentration of positions. Implementing the Dodd-Frank Act quickly and without dilution after this comment period expires will be greatly appreciated by all Americans as it will level the playing field for banks, investors and consumers alike.
Respectfully,
David Evrard
