International Swaps and Derivatives Association v. CFTC

Prior to the enactment of the Dodd-Frank Act in 2010, the Commodity Exchange Act (CEA) gave the Commodity Futures Trading Commission (CFTC) (defendant) the discretion to set position limits in the commodity derivatives markets. The CFTC would occasionally exercise this discretion if it found that excessive positions posed a risk to the stability of the markets. In the 45 years prior to Dodd-Frank, the CFTC generally made findings that such position limits were necessary before establishing such limits. Dodd-Frank amended the CEA and incorporated certain standards for establishing position-size limits. The standards provided that “the Commission shall, from time to time . . . proclaim and fix such limits . . . as the Commission finds are necessary to diminish, eliminate, or prevent such burden.” On January 13, 2011, after Dodd-Frank, Commissioner Michael V. Dunn of the CFTC stated that the CFTC had been unable to find any economic analysis supporting the need for new position limits. Two other commissioners expressed similar views. A Notice of Proposed Rulemaking was later issued on January 26, 2011, stating that the CFTC was “require[d]” to set position limits on certain commodities under Dodd-Frank. In October 2011, the CFTC adopted the position-limits rule by a vote of three to two. Commissioner Dunn explained that his position about the lack of necessity for the position limits had not changed but he nonetheless voted in favor of the rule because he believed he was required to do so under Dodd-Frank. The International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association (plaintiffs) filed an action in federal district court to challenge the position-limits rule.