On Dec. 5, the Commodity Futures Trading Commission voted unanimously to reissue rules establishing federal position limits on speculative trading in commodity futures and swaps for another round of public comment. The reproposal will be open for public comment for 60 days after publication in the Federal Register.
In a separate vote, the CFTC approved final rules on the aggregation of positions, a key component of the CFTC’s existing position limit regime. The final rules permit additional exemptions from aggregation, including an exemption for entities whose trading is independently controlled.
FIA has submitted numerous comment letters to the CFTC at earlier stages of this rulemaking and in the coming weeks FIA will review the reproposal and consider how to respond. FIA's past work on position limit issues in Europe, Asia and the U.S. can be viewed here.
Comments from Commissioners
CFTC Chairman Tim Massad said he decided to repropose the position limit rules for two reasons: to avoid finalizing rules at a time when the agency is "in transition" to new leadership; and to provide interested parties with the benefit of seeing all of the previously proposed changes in their entirety.
"I do not want to adopt a final rule today that the Commission would choose not to implement or defend next year," Massad said. "Our markets and the many end-users and consumers who rely on them are served best by having reasonable and predictable regulation. Uncertainty and inconsistency from one year to the next are not helpful."
Massad also noted that the CFTC will continue to enforce the existing federal limits for nine agricultural commodities as well as exchange-set spot month limits for all the physical delivery contracts covered by the reproposed rules.
CFTC Commissioner Chris Giancarlo commented that the reproposal introduces new estimates of deliverable supply as well as a number of revisions designed to address concerns raised at earlier stages of the rulemaking. Although he commented that the reproposal is "very complex", he said that he expects the rules to be finalized next year.
"I feel comfortable that the proposal before us provides the basis for the implementation of a final position limits rule that I could support," Giancarlo said. "I welcome commenters’ views on the proposal. I expect that with their added insight we can finalize a position limits rule in 2017 that is workable and does not undo years of standard practice in these markets."
CFTC Commissioner Sharon Bowen welcomed the reproposal as "one step closer" to the implementation of position limits and said she looks forward to its finalization in the near future.
Summary of Position Limit Reproposal
Under the reproposed rules, the CFTC would establish limits on speculative positions in 25 core physical commodity futures contracts and their “economically equivalent” futures, options, and swaps. The CFTC decided to defer action on three cash-settled futures contracts listed at CME.
In addition, the reproposed regulations include:
- A revised definition of a bona fide hedging position as well as revised exemptions for bona fide hedging positions in physical commodities.
- Requirements and acceptable practices for designated contract markets and swap execution facilities for setting position limits for the 25 referenced contracts as well as acceptable practices for exchange position limits or accountability rules in all other listed contracts, including excluded commodities.
- Permission for exchange recognition of non-enumerated bona fide hedging positions, certain enumerated anticipatory hedge positions, and granting of spread exemptions.
- Updated reporting requirements under part 19 of the CFTC’s regulations.
- A delay in the requirement for DCMs and SEFs that lack access to sufficient swap position information to establish position limits on swaps that are subject to a federal position limit.
View fact sheet describing the reproposal and a table showing the proposed limits for each commodity.
Read the full text of the position limits reproposal.
Read the full text of the final aggregation rule.