This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Court's Ruling Deals Dodd-Frank Another Blow

NEW YORK ( TheStreet) -- One news item getting surprisingly little airplay is Friday's ruling from Judge Robert Wilkins blocking the U.S. Commodities Futures Trading Commission from implementing new position limits rules in derivatives. It is surprising because this "little" ruling will set back Dodd-Frank reforms another six months at the very least, but even worse, call into question all of the new financial reform.

In short, the federal judge ruled that the CFTC did not pass his test of proving that position limits were necessary before imposing them -- in other words, the judge was unconvinced that position limits would do anything to stop financial speculation driving prices up in commodity markets, particularly, but not limited to the oil markets.

By ruling against the CFTC and for the Securities Industry and Financial Markets Association and International Swaps and Derivatives Association complainants -- represented mostly by investment banks like Goldman Sachs, Morgan Stanley, JP Morgan and other trading firms -- not only has the judge threatened the tools of the CFTC uses to regulate its markets, it has threatened the motivations for Dodd-Frank entirely.

So this is a big deal and leaves the CFTC in a very strange place. What can they do now to try and save their reputation, regulatory power and their mandate from Dodd-Frank? One thing they can try and do is rewrite their position limits rules to try and get inside the judge's idea of what is "necessary and appropriate," a process that will take at least six months and possibly more with limited chance of success.

A second option would be to abandon many of the tools that the CFTC customarily uses to regulate the futures markets, including position limit, margin and transparency requirements, and seek a new set of mandates from the government.

Both of these options are more than unpalatable -- they are nearly impossible.

The last option is the obvious but equally daunting one: Appealing the judge's ruling.

Without an overturning of this ruling, however, it is unclear how the CFTC can enforce its mandate of oversight over the futures markets given to it by the Dodd-Frank law. It is much more likely that the entire effort will be left on the scrap heap of history, and investors will again be forced to ask where the oversight was when the next derivative/futures/swaps financial crisis arrives.

In light of this ruling, it is becoming clear that the banks and traders have won their long battle and continue to notch victories in turning much of the Dodd-Frank legislation into a toothless and weak paper tiger.

And that will lead to a far easier path to a fresh financial crisis, and bad news for everyone.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Dan Dicker has been a floor trader at the New York Mercantile Exchange with more than 25 years of oil trading experience. He is a licensed commodities trade adviser.

Dan is currently President of MercBloc LLC, a wealth management firm and is the author of �Oil�s Endless Bid�, published in March of 2011 by John Wiley and Sons.

Dan Dicker has appeared as an energy analyst since 2002 with all the major financial news networks. He has lent his expertise in hundreds of live radio and television broadcasts on CNBC, Bloomberg US and UK and CNNfn.

Dan obtained a bachelor of arts degree from the State University of New York at Stony Brook in 1982.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,156.85 +24.88 0.15%
S&P 500 2,001.57 +2.59 0.13%
NASDAQ 4,562.1890 +9.43 0.21%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs