United States: CFTC Update: CFTC Proposes New Position Limits And Aggregation Rules


On November 5, 2013, the Commodity Futures Trading Commission (the "Commission" or "CFTC") approved proposed position limits rules (the "Proposed Position Limits Rules")1 and proposed new aggregation standards for determining compliance with position limits (the "Proposed Aggregation Standards" and, together with the Proposed Position Limits Rules, the "Proposed Rules").2 The CFTC voted three to one in favor of the Proposed Position Limits Rules, with Commissioner Scott O'Malia dissenting, and unanimously in favor of the Proposed Aggregation Standards.3 Both proposals will be open for public comment commencing 60 days after publication in the Federal Register. These proposals are designed to implement certain statutory amendments which were added to the Commodity Exchange Act by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), as interpreted by the Commission.

Please note that this memorandum is based on a preliminary review of the Proposed Rules, the fact sheet and frequently asked questions and answers issued by the CFTC, and comments made by CFTC Commissioners and staff during the public meeting, and is intended to provide a high level overview of various significant aspects of the Proposed Rules in summary form. We expect to issue a more detailed memorandum after the Proposed Rules are published in the Federal Register.

The Proposed Position Limits Rules come after a previous version4 was vacated by a Federal District Court Judge in 2012. Although the Commission had appealed that decision, it ultimately decided instead to propose this new set of rules and dismiss its appeal.5 The Proposed Aggregation Standards are quite similar in most respects to the amendments proposed by the Commission in May 2012, although the new version reflects certain comments received in response to the May 2012 proposal and also includes certain other revisions.6

Summary of Proposed Position Limits Rules

The Proposed Position Limits Rules will, if adopted, establish limits on speculative positions in twenty-eight specified exempt (i.e., energy and metals) and agricultural commodity futures and options contracts traded on a designated contract market (a "DCM") (such contracts are referred to as "core referenced futures contracts" in the Proposed Rules), and their "economically equivalent" futures, options and swaps.

The Proposed Position Limits Rules set forth both spot-month and non-spot-month limits. The proposed spot-month limits will, if adopted, be based on the spot-month limit currently in place at DCMs (or estimates of deliverable supply submitted by one or more DCMs and verified by the CFTC), but will eventually be based on the CFTC's determination of deliverable supply. Such limits will be readjusted no less frequently than every two years and will generally be set at 25% of estimated deliverable supply. Spot-month limits will also apply separately for physical-delivery contracts and cash-settled contracts in the same commodity.

The proposed non-spot-month limits (which include single-month and all-months-combined limits) will, if adopted, be based on open interest in futures and swaps that are significant price discovery contracts and will be readjusted no less frequently than every two years. Non-spot-month limits will be set at 10% of open interest in the first 25,000 contracts and 2.5% above that. It appears that non-spot-month limits will apply across both physical-delivery contracts and cash-settled contracts.

Exemptions from Position Limits

The Proposed Position Limits Rules also provide for a certain number of exemptions from position limits, including:

  • An exemption from the cash-settled spot-month limit up to five times the level of that limit, provided that the relevant trader does not hold any position in the physical delivery spot-month contract in the same commodity.
  • Certain exemptions for bona fide hedging positions in physical commodities based on the Commission's interpretation of the Dodd-Frank Act's new requirements for such positions. These include new exemptions for unfilled anticipated requirements for resale by a utility, royalties and service contracts.
  • A "pass through swap" exemption for a trader when it enters into a swap for a counterparty for whom the swap qualifies as a bona fide hedge, provided the trader offsets the trade subsequently and subject to certain conditions.
  • An exemption for positions established in good faith prior to the effective date of the initial limits.

We expect that commenters will object to the narrow scope of many of these exemptions.

Proposed New Aggregation Standards

The Commission is proposing modifications to the aggregation provisions of the CFTC's Part 150 rules that are substantially similar to the amendments to the aggregation provisions that the CFTC had proposed to be added to the now vacated Part 151 rules in May 2012. The Proposed Aggregation Standards generally require that, absent a specific exemption, a person must treat as its own any positions in any account in which it has, whether directly or indirectly, a 10% or greater ownership or equity interest, even if the person does not control the trading in such account. Also, a person must treat as its own the positions in any account on the basis of control over the trading decisions in the account, or on the basis of trading pursuant to an express or implied agreement or understanding with another person, which is consistent with longstanding CFTC policy. In addition, the Commission is proposing to add a new aggregation provision, which is applicable to positions in accounts with so-called "substantially identical trading strategies," even if apparently a person does not control the trading in such accounts and has less than a 10% interest in such accounts and notwithstanding the availability of an exemption from aggregation which otherwise would be applicable. We expect that commenters will object to this provision and will also request guidance as to its intended meaning and scope.

Exemptions from Aggregation

In addition to existing exemptions from aggregation which are applicable to futures commission merchants, commodity pool operators and pool participants and independent account controllers, the Proposed Aggregation Standards provide for certain other exemptions from aggregation including, but not limited to, situations in which: (i) the sharing of information would violate or create reasonable risk of violating federal, state or foreign laws or regulations; (ii) an ownership interest is no greater than 50% in any other entity whose trading is independently controlled; (iii) an ownership interest is greater than 50% in another non-consolidated entity whose trading is independently controlled and an applicant certifies that such entity's positions qualify as bona fide hedging or do not exceed 20% of any position limit; and (iv) ownership in another entity results from broker-dealer activities in the normal course of business as a dealer, but not greater than 50%.

Notice Filing Relief

Under the Proposed Aggregation Standards, the exemptions are not self-executing for the most part and generally require a notice filing with the Commission. A notice filing must provide a description of the relevant circumstances that warrant an exemption and a statement of a senior officer of the entity certifying that conditions set forth in the applicable aggregation exemption provision have been met. Also, a notice filing must be amended in the event of any material change. Additionally, note that a person with a greater than 50% ownership or equity interest in an owned entity seeking an aggregation exemption must apply to the Commission for relief on a case-by-case basis and relief would not be effective upon filing the notice. Among other things, an applicant must demonstrate that (i) the owned entity is not required to be, and is not, consolidated on the financial statement of the person; (ii) the person does not control the trading of the owned entity, with evidence that it and the owned entity have procedures in place that are reasonably effective to prevent coordinated trading notwithstanding majority ownership; (iii) each representative of the person on the owned entity's board of directors attests that he or she does not control trading of the owned entity; and (iv) the person certifies that either (a) all of the owned entity's positions qualify as bona fide hedging transactions or (b) the owned entity's positions that do not so qualify do not exceed twenty percent of any position limit currently in effect. Thus, this relief would not be automatic, but would be available only if the Commission finds, in its discretion, that the conditions are met.

The Proposed Rules have vast implications for the futures, options and swaps markets and market participants and raise a host of interpretative questions, issues and other concerns.

We will continue to monitor and report on developments in this area.


1 http://www.cftc.gov/PressRoom/Events/ssLINK/federalregister110513c

2 http://www.cftc.gov/PressRoom/Events/ssLINK/federalregister110513

3 The Commission only had four Commissioners at that time and as of today has only has three Commissioners.

4 See 76 Fed. Reg. 71626 (Nov. 18, 2011).

5 See ISDA v.CFTC, 887 F. Supp. 2d 259 (D.D.C. 2012) and ISDA & SIFMA v. CFTC, No. 12-5362 (D.C. Cir.).

6 See 77 Fed. Reg. 31767 (May 30, 2012).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions