CFTC Reopens Comment Period for Position Limits Rule

December 08, 2014

Spurred by ongoing concerns that moves to restrict speculation will hurt hedgers.

Gov regsThe Commodity Futures Trading Commission reopened the comment period for its position limits rule for 45 days on December 3. The rule is part of Dodd-Frank meant to keep speculators from unduly affecting or even cornering markets.

The CFTC passed its initial rules in 2011 but was challenged in court by the International Swaps and Derivatives Association. The court sent the issue back to the CFTC, which is now re-proposing its rules.

However, the ongoing complexity of the rules and their potential for limiting legitimate hedging activity has prompted the CFTC to re-open the comment period. While this is a widely accepted goal, the CFTC is cognizant of the need to act quickly.

According to Commissioner Sharon Bowen, “As we continue to finalize and fine-tune our Dodd-Frank rulemakings, we have to avoid the temptation to simply ratchet back or weaken prior versions of those rules. In fact, I think the best way of viewing changes to our rules is not that we are tweaking them, but rather that we are enhancing them. Sometimes that may mean making the rules more cost-effective and leaner, but at other times that will mean making them stronger than before. Enhancing a rule can mean reducing burdens to business while strengthening protections for the public. I believe our position limits proposal is exactly the sort of rule that needs to be enhanced, and I look forward to working with my fellow Commissioners to finish and release this rule in a timely fashion.”

In a CFTC factsheet, the Commission’s proposed regulations call for: 

  • Commission administered limits on speculative positions in 28 core physical commodity contracts and their “economically equivalent” futures, options, and swaps (collectively “referenced contracts”). 
  • stablishment of speculative limits on referenced contracts effective sixty days after publication of a final rule.

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