Gary Gensler, chairman of U.S. regulator the Commodity Futures Trading Commission (CFTC), vowed to push ahead with a new rule to curb speculation in commodity markets after a court threw out the CFTC's plans last week.
Gensler, who was travelling in Europe, told Reuters in an interview that the U.S. Congress had issued a clear mandate to the CFTC to introduce limits on the positions commodity traders can hold.
On Friday U.S. District Court Judge Robert Wilkins sent the limits rule back to the CFTC two weeks before it was to take effect, saying the watchdog had no mandate to introduce it without showing it was necessary.
"We should continue forward and get advice from our attorneys on how to do that. When judges rule, we consider what to do, we consider whether to appeal and so forth and move forward," said Gensler, a former Goldman Sachs banker.
"They (position limits) help protect the markets and help promote market integrity, and I look forward to working with my fellow commissioners to do just that," he said.
Bart Chilton, one of five CFTC commissioners, said in Rome that he thought the CFTC should "immediately" appeal against the court decision and seek a stay so that it could go forward.
It should also start drafting yet another rule to address the concerns of the court, Chilton said on Tuesday.
The CFTC has been writing large parts of the U.S. Dodd-Frank legislation that was drafted to prevent a repeat of the 2008 financial crisis, aiming to make financial markets more transparent and less fragile.
On his way to Madrid to meet the International Organization of Securities Commission (IOSCO), Gensler also said that Libor, the benchmark interest rate at the centre of a massive worldwide rate-rigging scandal, had been sufficiently damaged to require "replacement surgery".
"We have had in the past, in the energy markets particularly, sometimes when a benchmark has become obsolete, and then the market struggles with how to adjust."
This contrasts with the emphasis in a report by Martin Wheatley, a top UK regulator, last week that emphasized how Libor (London Interbank Offered Rate) should be repaired rather than replaced as this could not be done easily in the near term.
Gensler said there were alternatives for Libor - which is based on unsecured lending between banks, a market that has largely dried up in the wake of the 2008 crisis - but that market participants needed to decide.
"The critical thing is that it be based on observable transactions, sufficient so that we don't have misconduct in the setting of these rates," he said.
Wheatley, managing director of the Financial Services Authority, mapped out in his report how to improve governance of Libor, taking it out of the hands of lobby group the British Bankers Association, a step Gensler welcomed.
Wheatley and Gensler will now head an IOSCO-led task force to look for alternatives. In Madrid Gensler will attend an IOSCO meeting to sketch out a work plan for the task force, which is due to report by next March.
Gensler, the top derivatives regulator in the United States, is overseeing a welter of changes that will reshape the $650 trillion global industry, which generates crucial revenues for investment banks and trading firms.
He said there had been "tremendous progress" in harmonizing transatlantic derivatives rules, such as on the amount of safety margin trading partners have to put up in uncleared over-the-counter derivative markets.
"We are committed in the U.S. to have alignment with Europe and hopefully Asia," Gensler said.
"We said jointly ... that (a safety margin) should not be required of non-financials or end users," he said.
"I would hope that that would become the international consensus. For financial entities, we are considering when different types of margin should be posted."
(Editing by Will Waterman)