U.S. commodities path not for FSA

By Pratima Desai

LONDON (Reuters) - Position limits on commodity futures are not on the agenda in Britain even if the United States puts pressure on the UK financial watchdog, which has other ways of deterring market abuse.

But different rules in different jurisdictions could potentially trigger a migration of business to London.

The debate over whether Britain's Financial Services Authority (FSA) will follow the United States has heated up recently as U.S. regulators are pushing for more stringent limits on commodity positions.

"British and European regulators won't go down the route of imposing position limits on commodity futures because they see that as a rather blunt instrument," said Jonathan Marsh, a partner at law firm Berwin Leighton Paisner.

"I suspect European regulators will take the view that they have appropriate tools to regulate commodity markets."

The U.S. Commodity Futures Trading Commission (CFTC) is currently holding hearings on excessive speculation in energy futures trading.

No decisions have yet been made on higher position limits or on exemptions for commodity producing companies.

But when they are, the CFTC may attempt to bulldoze Britain into following. Any attempt is expected to fail because in Britain commodity exchanges, and not the regulator, are responsible for fair and orderly markets.