CFTC Unveils Final Position Limits Rule

After months of deliberation and comment, here is the final position limits rule.  The final rule is approximately 100 pages longer than the version leaked to the press earlier this month.

CMC and our Position Limits Task Force are busy reviewing the details.  It will also be a featured agenda item for Sanjeev’s Tuesday Policy Call.  Interested CMC members should be sure to dial-in.


Position Limits Rulemaking Comes Into Focus

After months of deliberation and 15,000 comments, the Commodity Futures Trading Commission finally brought the rulemaking to a vote.  As expected, the vote cut along party lines with Gensler, Dunn, and Chilton lining up to support the measure.  Sommers and O’Malia gave detailed soliloquies in opposition and provided the guideposts for anyone interested in legally challenging the rule.

With amendments crafted during deliberations, Commission staff is still busy finalizing the language of the rule.  So, the public won’t get to examine the exact verbiage for a few more days.

The CFTC provided a Fact Sheet and Q&A prior to the hearing.  While they are helpful, they do not go into substantive detail.  Here are some points we do know . . . Read more of this post

CMC Awaits CFTC Decision on Position Limits

After months of deliberation, the CFTC will vote on a final rulemaking tomorrow morning at 9:30 am ET.  CMC will be watching for resolution on these issues:

  • Bona Fide Hedge Definition
    • Will the Commission recognize anticipatory merchandizing transactions based on throughput and not fixed-capacity?
    • Will the Commission retain the current 30-day reporting regime or will it move to a daily reporting requirement?
  • Position Limits
    • How will the Commission handle the CME proposal for ag markets?
    • What will the effective date be?
    • Will long-term contracts be included in deliverable supply?
  • Class Limits
    • Will the CFTC allow netting of futures and swap positions?
  • Conditional Limits
    • Will the Commission address conditional limits in the final rulemaking or will it treat this issue differently?
    • Will ag markets and energy markets receive disparate treatment?
  • Aggregation
    • Beyond the independent controller exemption, are any additional exemptions made for subsidiaries of non-financial firms?

CMC Meets with General Electric Government Relations

CMC met with an executive in GE’s Government Relations team.  Being the massive conglomerate they are, GE is interested in derivatives regulation from an end-user perspective and a financial services perspective.  We briefed them on the issues of interest that CMC is working on right now as pertains to Title VII of the Dodd-Frank Act (position limits, margin requirements, bona-fide hedging, affiliate transactions, product and entity definitions, etc).  They echoed CMC’s opinion that it is essential for large companies that have operations in various countries to be very mindful of the financial regulatory and political/legislative processes in multiple jurisdictions other than their own home base.

CMC Meets with Sen. Scott Brown’s Staff

CMC met with Senator Scott Brown’s Legislative Director today. Although Sen. Brown (Republican – Massachusetts) does not sit on the Banking or Agriculture Committees, he is very interested in derivatives issues because many of his constituent firms in Massachusetts (especially financial companies) are heavy users of derivatives. Being a moderate Republican, he is also a very important swing vote in the Senate on several pieces of legislation. CMC discussed the following issues at a broad 30,000-foot level with the staffer: position limits and bona-fide hedging, and international co-ordination of derivatives regulations across various jurisdictions. Sen. Brown’s office is also very interested in forex swaps, and expressed an interest to continue an ongoing discussion with CMC on that topic.

CFTC Vote on Trading Curbs Stalls

Wall Street Journal


December 17, 2010

WASHINGTON—U.S. regulators Thursday released a broad proposal that seeks to curb speculative trading in oil, metals and other commodities, but held off voting on it in another setback for efforts to put in place Congress’s Wall Street overhaul.

CFTC Commissioner Bart Chilton asked how traders would be treated while the rules are being phased in.
The new rules would limit the size of the positions traders could take in the commodities. They respond in part to the spike in oil prices above $140 a barrel in the summer of 2008, which some critics blamed on regulators’ alleged failure to keep a tighter leash on speculation.

Top commodities regulator Gary Gensler has been pushing for position limits since last year, and the Dodd-Frank financial law passed in July authorizes his Commodity Futures Trading Commission to act on the issue.

The commission was nearly ready to do so Thursday, as the five-member body met with a draft of the rules before it. But Mr. Gensler had cold feet at the last moment after commissioners expressed concern, and put off a vote on a formal proposal, probably until January. After a public-comment period, a second vote would be needed to make the proposal final.

“I think it’s just appropriate to let this one ripen a little bit more,” Mr. Gensler said.

The delay highlighted concerns among some, including Republicans in Congress, that the CFTC isn’t taking enough care as it writes rules to transform commodities markets at breakneck speed to meet deadlines under the Dodd-Frank law.

The law gives broad new powers to the CFTC, sparking a rolling battle with Wall Street about issues that will shape markets for many years to come.

Continue reading here.