AP:

WASHINGTON — A key federal regulator said Tuesday his agency must “seriously consider” imposing stringent limits on speculative trading of energy futures contracts, a move that would mark a major shift for the government.
Gary Gensler, chairman of the Commodity Futures Trading Commission, made the assertion as the agency prepared to hear from consumers, businesses, traders and big financial firms. The Chicago Mercantile Exchange expressed willingness itself to set new limits on energy trading but insisted that it, not the government, was the proper authority to do so.
Gensler said at a hearing organized by the agency that it must assess the impact of speculators and its rules “should address times of volatile or uncertain markets.”
The futures contracts are supposed to reduce price volatility. But speculators use them to bet on market prices, and critics say this magnifies price swings. Regulators, they maintain, have long let speculation in energy markets inflict financial pain, triggering wild price swings, hurting gasoline wholesalers, damaging airlines and squeezing consumers at the gas pump and airline ticket counter.
“I believe we must seriously consider setting strict position limits in the energy markets,” Gensler said.
Craig Donohue, the CEO of CME Group Inc. — owner of the Chicago Mercantile Exchange where energy futures are traded — said his firm “is in the best position” to impose and manage trading limits and is “prepared to act in the near term, before the (CFTC) or Congress.”
“We strongly believe we have our own responsibility,” Donohue said.
By law, the CFTC sets limits on the amount of futures contracts in agricultural products like wheat, corn and soybeans that can be held by each market participant to protect the market against manipulation. But for energy commodities — crude oil, heating oil, natural gas, gasoline and other energy products — it is the futures exchanges themselves that set the position limits.