* One player could hold a position of up to 40 percent
* Campaigners call on European Parliament to act
* Rules would take effect from Jan. 2017
By Barbara Lewis and Huw Jones
BRUSSELS/LONDON, May 21 (Reuters) - New European Union rulesto crack down on speculation in food and other commodity pricesrisk being watered down during final negotiations over detail,campaigners said on Thursday.
Following the United States' lead, the 28-country bloc willset limits on how big a position traders can hold in grains, oiland other commodities to avoid undue influence over prices.
The details of the so-called position limits are beinghammered out behind closed doors in Brussels, with the nexttechnical meeting set for Tuesday.
The limits are part of a wider revision of EU securitiesrules known as MiFID II to take effect in January 2017.
Although agreed last year, the legislation needs to befollowed up with technical implementation law, expected to beagreed by the end of this year.
A 500-page draft prepared by the EU markets watchdogEuropean Securities and Markets Authority proposes that nationalwatchdogs would calculate a position limit for a commodityderivative based on 25 percent of the deliverable supply.
A separate clause gives the national authorities the powerto increase or decrease the baseline position by 15 percent,making 40 percent the maximum.
Campaigners say that is excessive and counter to the spiritof the last year's agreement by member states and the EuropeanParliament.
In a letter to German Member of the European ParliamentMarkus Ferber, who is representing the parliament in thenegotiations, Oxfam and four other non-government organisationsurge him to prevent the adoption on "ineffective" regulation.
"If approved, the rules to implement MiFID II currentlyproposed by the European Securities and Markets Authority (ESMA)will turn limits on speculation decided by the EuropeanParliament into an empty shell," says the letter signed byFinance Watch, Friends of the Earth Europe, SOMO (Centre forResearch on Multinational Corporations), Global Justice Now, aswell as Oxfam.
Some exchanges have already started introducing positionlimits or other curbs in anticipation of the rules in the EU andsimilar limits planned in the United States.
Britain, home to the City of London financial district, hasbeen at the forefront of those seeking to reduce Brusselsinterference, saying it will have its own tough rules to preventabuse, while preserving flexibility.
Paul Reed, BP's head of trading, last month saidposition limits could cause severe stress on markets with only asmall number of participants. (Additional reporting by Dmitry Zhdannikov in London, editingby William Hardy)