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Dodd-Frank

Plaintiffs Challenging CFTC Position Limits Dealt Set Back

by   |   January 24, 2012

As we noted, the International Swaps and Derivatives Association, Inc., or ISDA, and the Securities Industry and Financial Markets Association, or SIFMA, filed a legal challenge to the CFTC’s final rules that limit the positions that investors may own in certain commodities. The Associations believe that the position limits rule may adversely impact commodities markets and market participants, including end-users, by reducing liquidity and increasing price volatility. In addition, the Associations contend that the CFTC’s decision-making process in enacting the rule was procedurally flawed.

Unlike the US Chamber of Commerce’s success in challenging the SEC’s proxy access rules, it appears the plaintiffs in the position limits litigation will not have a quick, striking success.  The United States Court of Appeals for the District of Columbia Circuit dismissed the petition for review.

The court in the order granting the motion to dismiss noted: “Under the law of this circuit, the ‘normal default rule’ is that ‘persons seeking review of agency action go first to district court rather than to a court of appeals. . . Initial review occurs at the appellate level only when a direct-review statute specifically gives the court of appeals subject-matter jurisdiction to directly review agency action.  There is no express congressional authorization of direct appellate review applicable to the petition for review in this case. Both the Commodity Exchange Act, 7 U.S.C. §§ 1-26, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376 (July 21, 2010), are silent with regard to judicial review of Commission actions like the Rule at issue in that petition, while providing direct appellate review only for different, specified Commission actions.”

The court also ordered that the emergency motion to stay the rule be dismissed for lack of subject matter jurisdiction.

It’s certainly hard to square with the court’s action in the proxy access litigation, but as we noted the claims are substantially different.

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