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Suit Filed By Financial Industry Dismissed By Appeals Court

It appears that a court of appeals has decided to dismiss a lawsuit which was filed by the financial industry against the new federal regulations that would be geared toward cracking down on conjecture in the commodities market. This move will more than likely cause a delay to a decision being made over whether to pass the rules or not.

The Financial Markets Association, The Securities Industry as well as the International Swaps and Derivatives Association filed these challenges back in December. The challenge was against regulations which were put into effect by the Commodities Future Trading Commission.

The US Court of Appeals in Washington DC ruled that the case would have to be heard in a lower court. This argument was of course put forth by the Commodities Future Trading Commission, also known as the CFTC. The panel which was comprised of three judges made their ruling based on the fact that there is no distinct congressional authorization of the direct appellate review that would be considered applicable to this particular for review.

The judges also stated that federal law on the matter was in place for other organizations and agencies; however not for challenges of the new regulations. The CFTC had made their votes back in October and the outcome was 3-2. This set limits on positions regarding the amount of commodities swaps and futures that a single trader could hold. This moves has been seen by many traders as a politically charged motivation to place cap prices which would in effect make the market more volatile and less liquid.

Shortly after the regulations were put in place, the two trading groups filed a lawsuit in order to try and contest the new set of rules, claiming that the CFTC had gone over the line and had exceeded its power, and that there was no justifiable reason for the regulations.

The CFTC made the argument that the lawsuit should be first heard in the US District court in DC. This is the typical process as once a case is heard and decided upon in this lower court, the appellate court is where challenges are made, making the process quite a bit longer. Some might believe that this is the reason the argument was made in the first place but that is only speculation as there has been no official comment made that speaks to the reasoning of the CFTC.

While the statute seemed unclear to the two trading groups, they were not quite sure what the answer would be which is the reason they made the choice to file in both of the courts, according to Steve Kennedy who is a spokesperson for the ISDA. The financial industry groups had already filed the same challenge with the district court in DC but they thought they would have to wait until the appellate court decision was handed down.

 

 

1 comment to Suit Filed By Financial Industry Dismissed By Appeals Court

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