In a measure decried by Wall Street and trading companies as a misguided political attempt to cap soaring oil and grain prices, the CFTC is poised to approve "position limits" that will cap the number of futures and swaps contracts that any single speculator can hold. The divisiveness of the rule, set for a formal vote at the end of today's meeting, was stark from the opening. Key swing vote Michael Dunn, a Democrat whose term has already expired, said he would follow the Dodd-Frank law to set the limits while blasting them as a distraction from bigger issues. He said markets may become more risky, and hedging practices more difficult, possibly leading to higher prices. The rule covers 28 commodities from coffee to crude to copper, including nine crop markets that were already subject to limits, using a predetermined formula based on deliverable physical supply or open interest in the market. It includes for the first time contracts in the $600 trillion swaps market. All the rules will be phased in over time, with the final limits for all contract months set only after the agency has collected a year's worth of swaps data, a process likely to be finished only late into 2012, officials said. Several key provisions were eliminated from the CFTC's original proposal in January, as Reuters reported. The commission is deeply split and a lawsuit to stop the measure seems ever more likely, one more hurdle for CFTC Chairman Gary Gensler, who is struggling against emboldened Republicans and a hostile Wall Street to put in place the rules required by the Dodd-Frank financial reforms. The position-limits rule may be challenged on grounds that the costs outweigh the benefits of a plan that many industry officials say will make markets riskier by driving trade to less-regulated overseas venues. It was not immediately clear who might bring a lawsuit, but the limits will affect dozens of major commodity traders and exchanges. Normally there is a limited period of two or three months after a rule is published in which a suit can be filed, though some of the rules will not take effect until late 2012. Gensler will also need to encourage overseas regulators to keep up with the CFTC to prevent the "regulatory arbitrage" that many fear may ensue. A meeting of global regulators in London on Friday to discuss high-frequency trading will offer him a chance to encourage others to prevent loopholes. But it's an uphill battle. Over the weekend, France failed to force mandatory curbs on energy and food commodities, and Britain's Financial Services Authority -- which oversees most of the major non-U.S. commodity exchanges -- has maintained a staunch opposition to mandated limits. [Reuters, 10/18/11]