CFTC LIMIT PLAN MAY NOT REVERSE LIQUIDITY DROP
A proposal by the Commodity Futures
Trading Commission, CFTC, to raise federal limits on futures
speculative positions for certain agricultural commodity
contracts would not reverse a decline in liquidity in those
markets that started in 1981, two CFTC commissioners said.
    Commissioners William Seale and Kalo Hineman told a House
Agriculture subcommittee a recent proposal that would have the
effect of raising deferred month speculative position limits on
several agricultural commodity contracts would not
substantially increase liquidity in those months.
    "I seriously doubt that increasing speculative limits will
create a great deal of liquidity in the back months," Seale
told the House Agriculture Subcommittee on Conservation, Credit
and Rural Development.
    Analysts have attributed much of the liquidity squeeze to a
1981 tax law change, which by changing the treatment of
so-called straddles limited the ability of futures commission
merchants to roll positions forward for tax purposes.
    CFTC Chairman Susan Phillips said only that the commission
would take into account Congress' recommendation that federal
speculative limits be raised.
    The Chicago Board of Trade and the MidAmerica Commodity
Exchange have expressed concern that the CFTC plan would
decrease spot month limits for certain of their contracts.
 Reuter
