The industry disagrees on various parts of financial reform, but few in the industry seem to disagree that position limits as proposed by the CFTC are not a good thing. The outcome of broader financial reform will certainly have an impact on how this finally plays out, but with such strong consensus that position limits will limit liquidity and could drive business out of the US it seems unlikely we’ll see major change here. However, Washington politics can not be ignored and could serve as the wild card in this debate.
“[Regulators] are walking a bit of a tightrope, trying to find the in-between to put the controls in place to oversee the market effectively without driving business away,” says Kevin McPartland, senior analyst at Tabb Group. “The [goal] is to make the market more transparent, but if they artificially limit trading, then price discovery will be less accurate rather than more.”
McPartland says, “Washington needs an understanding from the investor community of how these markets operate on a day-to-day basis instead of just from a political perspective.”