UPDATE 1-U.S. lawmakers mull oil trading ban on big banks

(Adds reaction from calPERS, paragraphs 9-10)

By Ayesha Rascoe

WASHINGTON, June 18 (Reuters) - Sen. Joseph Lieberman on Wednesday unveiled three draft legislative proposals aimed at limiting speculation in crude oil futures markets, including one that would ban participation by big institutional investors.

The Senate Homeland Security and Governmental Affairs Committee, which Lieberman chairs, will hold a hearing on the bills on June 24. Walter Lukken, acting chairman of the U.S. Commodity Futures Trading Commission, is expected to attend.

One proposal would ban pension funds and institutional investors with more than $500 million in assets from futures markets. Another would set position limits on investment banks like Goldman Sachs (GS.N) and Morgan Stanley (MS.N) that offer "swap" deals as middle-man between two parties that want to take offsetting oil market positions.

The third proposal would force the CFTC to confront speculation that causes prices to rise "beyond levels justified by the market fundamentals."

Lieberman and Sen. Susan Collins, Maine Republican, said they want to propose formal legislation after the July 4th congressional recess that Congress can weigh before the end of the year.

U.S. regulators are feeling heat to limit speculation in commodities markets, which U.S. lawmakers see as a prime mover behind the surge of nearly 40 percent in crude oil prices since January to record highs near $140 a barrel.

"A certain amount of speculation in this market helps the physical traders but the speculators are now dominating the commodities markets," Lieberman, an independent from Connecticut, said at a press conference.

While commodity market investment by big institutional investors has grown to $260 billion from $13 billion five years ago, physical traders like farmers and oil dealers have been forced to the sidelines, Lieberman said.

CalPERS, the biggest U.S. pension fund, said on Wednesday its board was monitoring congressional proposals to limit pension funds' involvement in commodities but added that it was too early for it to comment on the idea.

"The board has been discussing the matter, not Lieberman's specific proposal, but just the whole issue of the pricing," calPERS spokesman Clark McKinley told Reuters.

"There's no position as yet on this, and there's no predicting if and when the board will take a position on it," McKinley said, adding that the board was meeting again on Thursday.

The CFTC, under pressure from lawmakers, has announced an inter-agency task force to explore commodity market activity.

On Tuesday, it also announced a deal with its U.K. counterpart to place trading limits on oil contracts traded on ICE Futures Europe, a London electronic exchange.

Despite these actions, Collins said the agency has been "timid" in its handling of the surge in commodities prices. (Additional reporting by Barani Krishnan in New York)