The CFTC last week proposed new curbs on speculative trading in 28 commodities - that would phase in the trading limits over time.  Terms of the rule are identical to a plan outlined in December, only this time the agency had the votes to move forward.  The Commission's objective is to prevent distorted prices at the gas pump and in the supermarket. 

“Position limits help to protect the markets both in times of clear skies and when there is a storm on the horizon.”  -- CFTC Chairman Gary Gensler.

The proposal was advanced by a 4-to-1 vote, although it wasn't easy:  (i) it took months to accomplish the vote margin;  (ii) one Republican commissioner opposed the proposal, saying the Commission first needed to understand how widespread speculative trading had become;  (iii) the other Republican commissioner, Scott O’Malia, voted for the plan but remains "very skeptical" of the plan;  (iv) Republican commissioners and financial industry groups argue the proposals could go too far, while one Democratic commissioner is calling for tougher limits.

The Dodd-Frank Act requires the CFTC to limit the amount of futures contracts that a single trader or firm can hold on a commodity, though the law failed to offer much guidance on the scope of the limits. The law did mandate that the agency finish the rules by 1/17/11, a deadline that the resource-strapped commission has said it will miss - its trying to striking a balance between curbing speculation and controlling prices.

The commission’s vote on Thursday, 1/13, is far from the final step for position limits.  It means only that the plan is open for public comment for 60 days and, once that period expires, the 5 commissioners will have to vote on a finalized version of the rule.   [NYT DealBook, 1/13]