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Risk.net Quotes Rick Shilts on CFTC Position Limits

April 26, 2016

Risk.net quoted Rick Shilts in an April 13 article titled “Massad Denies Silencing Position Limits Analysis.”  The article discusses allegations that the chairman of the Commodity Futures Trading Commission (CFTC), Timothy Massad, acted to censor research by agency economists who would have questioned the necessity of implementing position limits on commodity and energy derivatives contracts.  The chairman has refuted the findings of a January report from the commission’s Office of the Inspector General into allegations of improper conduct within the agency’s Office of the Chief Economist (OCE).  The storm over position limits hinges on the requirement in Dodd-Frank that the CFTC must find such limits are “necessary or appropriate” in order to combat market manipulation before the commission goes about implementing them.

Mr. Shilts, former director of the CFTC division of market oversight, says:  “When I was at the commission, the OCE compiled a list of dozens of studies that had been put together over the years.  There was simply no good conclusion you could draw as to whether position limits are helpful in limiting price volatility, whether they have no effect or whether they are adverse to market liquidity.  For every study that says they have one effect, there is another that says they have the opposite effect.”

The full article can be read at Risk.net (subscription required).