The top U.S. derivatives regulators voted 3 to 2 today to curb trading in oil, wheat, gold and other commodities after a boom in raw-materials speculation, record- high prices and years of debate and delay.

The rule has been among the most controversial provisions of the Dodd-Frank financial overhaul, enacted last year, which gave the Commodity Futures Trading Commission the authority to limit trading in over-the-counter commodity swaps as well as exchange-traded futures. The rule will limit the number of contracts a single firm can hold.

"Our duty is to protect both market participants and the American public from fraud, manipulation and other abuses," Chairman Gary Gensler said at the commission's meeting in Washington in support of the rule. "Position limits have served since the Commodity Exchange Act passed in 1936 as a tool to curb or prevent excessive speculation that may burden interstate commerce."

The rule limits traders to 25 percent of deliverable supply in the month nearest to delivery. The spot-month limits apply separately to physically settled and cash-settled contracts. Deliverable supply will be determined by the CFTC in conjunction with the exchanges.

David Fuller's view My initial impression, having only just seen this report, is that it is a very good decision. I would have preferred it to be unanimous but that was never likely in the USA's current political climate.

The rule limits, established to date, will pose no threat to the vast majority of speculators who help to provide genuine liquidity in futures-traded commodity markets. Similarly, they will not impede normal hedging activities by the producers and commercial consumers of commodities.

However, they should help to prevent a fashion for commodity trackers from distorting the markets and contributing to damaging commodity price inflation, as Fullermoney has pointed out and discussed on numerous occasions in recent years. Perhaps even more importantly, the rules should prevent high frequency traders from front running while also causing even greater volatility to the detriment of commercial hedgers.

I would welcome more feedback on the efficacy of this CFTC ruling from more knowledgeable sources.