Federal Register: Position Limits for Derivatives, January 2011

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Gavel.png FINAL RULE: This page refers to the proposed rulemaking on position limits. The CFTC final rule was issued at its October 18, 2011 open meeting.
Dodd-Frank Timeline, Position Limits for Derivatives
Interim and Final Rule VACATED BY COURT ORDER Re-proposed Rule Issue Comment Deadline (reopen December 4, 2014)
November 18, 2011 September 28, 2012 November 5, 2013 January 22, 2015

On December 16, 2010, the CFTC held an open meeting, the Eighth Series of Proposed Rules under the Dodd-Frank Act. Among the topics at this meeting was a rule proposal regarding the setting of position limits for derivatives participants. After considerable discussion, the December 16 meeting adjourned without a vote having been taken on position limits.[1] The discussion continued at the commission's January 13, 2011 meeting, and a proposed rule passed 4-1, with Commissioner Sommers voting against the proposal. Significant requirements in the proposal:

  • Position limits are to be placed on 28 core physical-delivery contracts and their “economically equivalent” derivatives, in 2 phases: a transition period affecting spot months and based on deliverable supplies; and a second period affecting contracts outside 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-moramenth 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.

Related Documents: Fact Sheet, Q&A, Federal Register Entry


References

  1. Open Meeting on Eighth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on March 2, 2011.

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