Position Limits Regulation - Comment Letter - Citadel - Febuary 10, 2013

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Position Limits for Derivatives
February 10, 2013

From the comment letter:

"We fear that limiting the role investors can play in the commodity markets through the imposition of position limits will reduce liquidity and create greater price opacity. It will likely also result in the availability of fewer and more expensive risk management solutions for producers and consumers offered by remaining liquidity providers who extract greater economic rents for performing such functions."

"The Proposed Rules sensibly recognize offsets between highly correlated commodities, but then only allow such offsets to be recognized by market participants that qualify for a bona fide hedge exemption. We do not believe that this disparate treatment is warranted, and recommend that cross-commodity netting be permitted for all market participants. Further, to the extent the Commission does proceed with non-spot month position limits, but permits cross-commodity netting for all market participants, the quantitative test used to assess whether cross-commodity netting is permissible across non-spot months should be based on the correlation of the respective forward months being traded in each cross-commodity pair.."


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