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    PL Factsheet

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    The Commodity Futures Trading Commission (CFTC) proposed new regulations establishing position limits for derivatives as required by the 2010 Dodd-Frank Act. The regulations would place limits on 28 physical-delivery contracts and equivalent derivatives in two phases, starting with spot-month limits based on existing exchange levels, then expanding to include non-spot month limits and CFTC-determined deliverable supplies. The proposed limits and exemptions aim to prevent manipulation while allowing bona fide hedging.

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    PL Factsheet

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    The Commodity Futures Trading Commission (CFTC) proposed new regulations establishing position limits for derivatives as required by the 2010 Dodd-Frank Act. The regulations would place limits on 28 physical-delivery contracts and equivalent derivatives in two phases, starting with spot-month limits based on existing exchange levels, then expanding to include non-spot month limits and CFTC-determined deliverable supplies. The proposed limits and exemptions aim to prevent manipulation while allowing bona fide hedging.

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    The Commodity Futures Trading Commission (CFTC) proposed new regulations establishing position limits for derivatives as required by the 2010 Dodd-Frank Act. The regulations would place limits on 28 physical-delivery contracts and equivalent derivatives in two phases, starting with spot-month limits based on existing exchange levels, then expanding to include non-spot month limits and CFTC-determined deliverable supplies. The proposed limits and exemptions aim to prevent manipulation while allowing bona fide hedging.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    123 views1 page

    PL Factsheet

    Uploaded by

    MarketsWiki
    The Commodity Futures Trading Commission (CFTC) proposed new regulations establishing position limits for derivatives as required by the 2010 Dodd-Frank Act. The regulations would place limits on 28 physical-delivery contracts and equivalent derivatives in two phases, starting with spot-month limits based on existing exchange levels, then expanding to include non-spot month limits and CFTC-determined deliverable supplies. The proposed limits and exemptions aim to prevent manipulation while allowing bona fide hedging.

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    Commodity Futures Trading Commission

    Office of Public Affairs


    Three Lafayette Centre
    1155 21st Street, NW
    Washington, DC 20581
    www.cftc.gov

    Proposed Regulations Regarding Position Limits for Derivatives


    The Commodity Futures Trading Commission (CFTC) announced the approval for publication in the Federal
    Register of proposed regulations concerning position limits for derivatives. The regulations are necessary for
    implementing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

    The Dodd-Frank Wall Street Reform and Consumer Protection Act

    On July 21, 2010, the Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Among other
    things, the Dodd-Frank Act amended the Commodity Exchange Act to:
    • Require the Commission, as appropriate, to limit the amount of positions, other than bona fide hedge positions,
    that may be held by any person with respect to commodity futures and option contracts in exempt and
    agricultural commodities traded on or subject to the rules of a designated contract market (DCM).
    • Require the Commission to establish position limits, including aggregate position limits, for swaps that are
    economically equivalent to DCM contracts in exempt and agricultural commodities (collectively, economically
    equivalent swaps). Such limits must be imposed simultaneously with limits on DCM contracts.

    Position Limits for Derivatives

    The Commission’s proposed regulations call for:


    • Position limits to be placed on 28 core physical-delivery contracts and their “economically equivalent”
    derivatives.
    • Establishment of position limits on physical commodity derivatives in two phases:
    o Initial transitional phase: spot-month position limits only, based on deliverable supply determined by and
    levels currently set by DCMs.
    o Second phase: spot-month position limits, based on the Commission’s determination of deliverable
    supply, and position limits outside of the spot month.
    • Spot-month position limit levels set at 25% of deliverable supply for a given commodity, with a conditional spot-
    month limit of five times that amount for entities with positions exclusively in cash-settled contracts.
    • Non-spot-month position limit for each referenced contract to be set using the 10, 2.5 percent formula: 10
    percent of open interest in that contract below the first 25,000 contracts and 2.5 percent thereafter.
    • Non-spot-month position limits to consist of aggregate single-month and all-months-combined limits that would
    apply across classes, as well as single-month and all-months-combined position limits separately for (1) DCM
    futures and options and (2) all swaps.
    • Exemptions for bona fide hedging transactions (based on the Dodd-Frank Act’s new requirements for such
    transactions) and for positions that are established in good faith prior to the effective date of specific limits
    adopted pursuant to the proposed regulations.
    • Establishment of new account aggregation standards to replace the Commission’s current position limits
    aggregation policy.
    • A position visibility reporting regime that is similar to current reporting obligations for large bona fide hedgers.
    • New regulations establishing requirements and standards for position limits and accountability rules that are
    implemented by registered entities.

    Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080

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