The CFTC voted unanimously to supplement its December 2013 position limits proposal. The revised proposal (i) modifies the procedures for seeking exemptions from speculative position limits for non-enumerated bona fide hedging, and (ii) defines procedures for recognizing certain anticipatory bona fide hedge positions.

The supplemental position provides a new process for exchanges and swap execution facilities ("SEFs") to recognize certain positions in commodity derivative contracts as non-enumerated bona fide hedges or enumerated anticipatory bona fide hedges. The proposed procedures also exempt certain spread positions subject to CFTC review from federal position limits. The new proposal clarifies the general definition of "bona fide hedging position" for physical commodities under the standards set forth in CEA Section 4a(c). In a separate action, the CFTC proposed delaying that designated capital markets ("DCMs") and SEFs must set and monitor position limits on swaps until those markets and facilities have been granted access to the data that is necessary to accomplish the task.

CFTC Chair Timothy Massad stated that the supplemental proposal "would ensure that commercial end-users can continue to engage in bona fide hedging efficiently for risk management and price discovery."

CFTC Commissioner J. Christopher Giancarlo said that the proposal "appears responsive to a broad range of public comments" and "is a positive step forward in devising a final rule that will take into account certain practical realities associated with administering a workable position limits regime."

The proposal will be open to public comment 30 days after its publication in the Federal Register.

Attached is a summary of the CFTC's proposed supplement to its December 2013 proposal to establish position limits on futures contracts and economically equivalent swaps prepared by Cadwalader's Energy Group

Commentary / Steven Lofchie

By this action, the Commission demonstrates that it is reconsidering prior proposals that were burdensome and economically unsupportable. This revised proposal should prompt pundits and legislators to reexamine their attacks on the CFTC Committee that questioned the economic soundness of the original position limits proposal. (See Senator Warren Asks CFTC to Withdraw EEMAC Report on Position Limits.) Although Senator Warren was able to have the relevant CFTC study withdrawn (even in the absence of any basis for that action), all copies were not burned. In fact, the report can be accessed here on the Cabinet website).

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