Trade Associations Urge CFTC To Revise Position Limits Reproposal

Author:Mr Robert Zwirb
Profession:Cadwalader, Wickersham & Taft LLP

The MFA, SIFMA Asset Management Group and the Alternative Investment Management Association (collectively, the "Associations") recommended that the CFTC "examine carefully all relevant data and consider available alternatives in determining whether there are demonstrable concerns over excessive speculation" in revising its reproposed position limits rulemaking (the "Reproposal").

In a letter to the CFTC, the Associations urged the Commission to:

"[i]dentify a clear standard of 'excessive speculation' and incorporate that standard in its required necessity findings"; "[b]efore imposing position limits on a core referenced futures contract, make a necessity finding specific to such core referenced futures contract and explain why position limits, and the levels at which they are fixed, are appropriate for each such contract"; and "reduce compliance burdens and operational challenges" in the final aggregation rule. To the extent that the CFTC "makes a necessity finding and determines that position limits are appropriate for a specific core referenced futures contract," the Associations requested that the Commission:

ensure that position limits are appropriately tailored to a contract by providing individual consideration of the "contract's economic characteristics and the market dynamics of the underlying commodity"; "[m]ake an independent finding that limits on other than spot month contracts are needed to prevent excessive speculation"; grant the authority to administer position limits and accountability levels to exchanges; "[e]xclude economically equivalent contracts from position limits at this time to provide more time for the Commission to obtain and carefully analyze [certain] higher quality data"; "permit market participants to hold cash-settled contracts five times the limit of the physical-delivery contract regardless of whether positions are held in the underlying physical-delivery contracts"; "provide a market participant with the opportunity to be heard by the Commission or its staff" before taking action to modify exchange-granted, non-enumerated bona fide hedging...

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