Two leading energy exchange traded fund (ETF) providers urged the Commodity Futures Trading Commission to forestall action on position limits to U.S. oil and gas markets, which the fund providers believe would increase costs and reduce liquidity in related funds.
U.S. Commodity Funds and Deutsche Bank, two fund providers that amassed vast long positions in oil and gas futures, were among the last-minute petitioners to the CFTC during a 90-day public comment period, which ends today.
Nicholas Gerber, chief executive of the U.S. Commodity Funds LLC, told the CFTC that “the unintended consequences of the proposed rule may lead to even less transparency and more risk for investors in the financial energy markets.” Gerber is urging the CFTC to base any limits on the millions of underlying holders rather than the ETF provider.
Regulators have sought to regulate the futures market so as to limit undue influence over prices, Reuters writes. Some studies have come to question the theory that financial investment have artificially inflated prices. Still, the political will to curb investment into commodity markets remains strong and is being reinforced by the government’s stance on tough financial reform. [Commodity, Leveraged ETFs In Regulators’ Sights.]
Hans Ephraimson, CEO of DB Commodity Services LLC, stated that the CFTC’s proposal “finds no support in empirical evidence or regulatory precedent, it’s unduly onerous, will significantly limit the usefulness of the U.S. future markets to international traders, and is premature in light of pending congressional legislation.” [What CFTC’s Proposal for Commodity ETFs May Mean.]
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Max Chen contributed to this article.
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