Position Limits Regulation - Comment Letter - U.S. Chamber of Commerce - Febuary 10, 2014

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Position Limits for Derivatives
February 10, 2013

From the comment letter:

"In brief, the PL Proposal proposes spot month position limits that will generally be based on 25 percent of deliverable supply of the underlying commodity.3 The CFTC proposes to set the initial limits for Referenced Contracts at levels currently set by the designated contract market (“DCM”) that lists the Core Referenced Futures Contract, and also requests comment on alternative levels, including those provided by the CME Group.4 Non-spot month position limits under the PL Proposal would apply to all positions in all contract months combined or in single contract months, and would generally be set at 10 percent of the contract’s first 25,000 of open interest and 2.5 percent thereafter, but will initially be based on open interest in futures and swaps that are significant price discovery contracts."

"The PL Proposal not only fails to consider current data when setting position limits, it also disregards existing studies and empirical evidence that hard position limits will not reduce price volatility or prevent market manipulation. If position limits, such as those in the PL Proposal, are implemented without a full analysis of current market data, markets will likely be distorted and costs to hedgers increased. Further, participation in various markets will likely decrease. Such results would lead to less liquidity in markets, which would increase market volatility and costs to businesses, farmers and individuals attempting to manage their risks."



References

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