Position Limits Regulation - Comment Letter - CME Group - January 17, 2012

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Position Limits for Derivatives
January 17, 2012

From the comment letter:

“A policy of higher spot-month limits for cash-settled contracts in any linked market is contrary to the longstanding joint policy of the Commission and the exchanges. Indeed, as the Commission notes in the Release, the Commission staff has historically deemed acceptable both for physical-delivery contracts and their cash-settled look-a-likes a spot-month limit of 25% of estimated deliverable supply. This is sound regulatory policy because for such linked contracts, any impact to physical supply is immediately translated to the physical contract settlement price by the laws of supply and demand, and necessarily to the settlement price of the cash-settled look-a-like given that it is settled to the physically-delivered contract. Similarly, activity in the cash settled linked market is immediately translated in the underlying core physically settled market.”


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