Exclusive: CFTC lacks votes on position-limit plan: sources

By Christopher Doering

WASHINGTON (Reuters) - The U.S. futures regulator delayed a final vote on controversial measures to crack down on excessive speculation in commodity markets because it lacks the three votes needed for approval, sources familiar with the situation told Reuters on Wednesday.

The U.S. Commodity Futures Trading Commission announced on Tuesday it was delaying by another two weeks to October 18 its meeting to consider the long-awaited rule on position limits. It was the second time a vote had been postponed.

The disagreements hinge on some of the smaller, seemingly less-contentious elements of the plan, not on the areas in which the CFTC has yielded to industry complaints.

This may suggest that Chairman Gary Gensler does at least have in principle agreement on the need to impose limits on energy and metals markets, something several commissioners have questioned.

Two sources familiar with the agency's rule-making said the CFTC commissioners and staff were working on ironing out a myriad of differences, including details of conditional limits -- which allow for a higher limit in the spot month in a cash-settled contract than in a physically deliverable contract -- as well as the timing of imposing the limits.

"He doesn't feel like he has the votes," one source familiar with the CFTC's thinking told Reuters.

The source said a vote on the plan that would limit the number of contracts any one speculative trader could hold in commodity markets could be delayed again if support was not found among the five agency commissioners before October 18.

An individual who lobbies on behalf of the financial industry and follows CFTC rule-making closely said there were "individual components" creating tension within the agency and so far no agreement on what the rule should look like.

"Gensler is trying to herd enough cats to get three votes," he said.

CFTC spokesman Steve Adamske declined to comment.

COMMISSIONERS SPLIT

The commission has never presented a unified front on position limits, one of the most contentious pieces of the Dodd-Frank financial overhaul for big commodity traders.

In January, Republican Commissioner Jill Sommers opposed releasing the draft rule for public comment, while Democrat Michael Dunn and Republican Scott O'Malia expressed skepticism on how effective the rules would be. Gensler and Bart Chilton have been staunch supporters throughout.

Dunn, a commissioner with an agricultural background and an independent streak, has been widely seen as the key swing vote for ensuring passage, but he is due to step down as soon as his successor is confirmed by the Senate.

That leaves Mark Wetjen, 37, the Democrat who has been nominated by the White House to replace Dunn. The U.S. Senate has yet to set a date to confirm Wetjen, who is counsel and senior policy adviser to Senate Majority Leader Harry Reid.

He could be confirmed in time for the next rule-making meeting. While Wetjen is expected by many to vote along party lines, which could break the logjam on the position-limit plan, he has offered limited insight into his views on the financial reform rules that he will be tasked with helping to implement.

Last week, Reuters obtained a draft final rule on position limits that showed the CFTC was yielding to banks and other major traders on several key provisions.

The version also would have eliminated the proposed conditional limit. The CFTC cited comments that urged it to gain further experience with swaps to ensure adequate liquidity for bona fide hedging transactions and positions before imposing restrictive conditions on people holding both cash-settled and physical delivery referenced contracts.

U.S. lawmakers have turned up the heat on the CFTC to impose the plan, believing volatile oil and gasoline prices have slowed the country's recovery.

In August, Senator Bernie Sanders, a staunch critic of oil speculators, intentionally released oil-trading data that exposed the extensive positions speculators held in the run-up to record prices in 2008.

Meanwhile, the Senate's Permanent Subcommittee on Investigations said on Wednesday it would hold a hearing on October 6 to discuss excessive speculation and compliance with the Dodd-Frank Act. Gensler is scheduled to testify.

(Editing by Russell Blinch and Dale Hudson)