INTERVIEW-CFTC'S Dunn says commods position limits a way off

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By Rene Pastor

NEW ORLEANS, Jan 6 (Reuters) - New rules to limit the size of positions in commodity futures are a long way from a done deal, although the Commodity Futures Trading Commission could issue a proposal soon, a CFTC commissioner said on Wednesday.

"It's a process. People get frustrated because things don't happen overnight. I would expect that we would get the proposed regulation out, but we would not see the final regulation for some time," CFTC Commissioner Michael Dunn, told Reuters on the sidelines of the annual Beltwide Cotton Conference.

The CFTC is soon expected to release its proposal for limiting the role of big traders in energy and metal markets, which could be a major crackdown on commodity markets and a key part of the Obama administration's effort to stabilize financial markets.

The CFTC's reforms, which must still be opened to public comment before they come into force, are expected to limit the number of contracts investors can hold in "physical" commodities, such as crude oil and metals.

If other countries do not also impose similar position limits, trading might shift to overseas markets to circumvent tighter U.S. regulations, Dunn said.

"It certainly would make it difficult," he said. "What you would have is a flight."

Pressure on the CFTC to strengthen position limit rules surged after prices for oil and other essential commodities such as copper and platinum soared to record highs in 2008.

There has been intense debate between analysts about whether excessive speculation and big money inflows were responsible for the wild swing in prices.

Lawmakers criticized CFTC for not doing enough to tamp down the influx of hot money from hedge funds. Until recently, the once-staid agency was faulted for its hands-off approach.

(Reporting by Rene Pastor; Editing by Alden Bentley and Lisa Shumaker)