WASHINGTON (Reuters) - Senator Carl Levin and 18 other senators have filed a friend-of-the-court brief to help the commodities regulator defend its "position limits" rules aimed at preventing excessive speculation in oil markets.
The U.S. Commodity Futures Trading Commission passed the rules last year, but industry groups have sued to stop the rules from taking effect, saying they would irreparably harm the marketplace.
Levin and the other senators argued in their amicus brief that seven years of congressional studies back up the need for the position limits. They also rejected the industry groups' contention that the 2010 Dodd-Frank reform law did not explicitly require the CFTC to put the rules in place.
"Oil supplies are plentiful and demand is down, so high gas prices can't be explained by ordinary market forces of supply and demand," Levin said in a statement.
"The financial industry slapped the CFTC with a lawsuit claiming Congress never meant for the trading limits to prevent excessive speculation to be mandatory, but our amicus brief shows that is exactly what we meant and what the law requires."
The Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association are the groups behind the legal challenge.
The position limits restrict the number of contracts a trader can hold in commodities such as gold and oil. It was narrowly approved by the agency's five commissioners on October 18 by a vote of 3-2.
(Reporting By Karey Wutkowski; editing by Matthew Lewis)