FIA Submits Pre-Rulemaking Comment on Dodd-Frank Position Limits

by Futures Industry Association 03 Oct 23:22

The Futures Industry Association on Oct. 1, 2010 submitted a letter to the Commodity Futures Trading Commission on the application of speculative position limits on listed and over-the-counter derivatives involving exempt and agricultural commodities. The FIA submitted the letter ahead of the CFTC’s proposed rulemaking, which is expected sometime this fall. Under the Dodd-Frank law, the CFTC must finalize a position limit rule for energy and metals contracts by mid-January and for agricultural contracts by mid-March. The FIA recommended that the limits be set on an interim rather than permanent basis and that they be flexible. The FIA also recommended that any interim position limits apply only to net positions in economically equivalent contracts and “be set at a level that will not reduce market liquidity or cause migration of the price discovery function to foreign markets.” In addition, the FIA recommended that the CFTC consider proposing an interim rule that aggregates positions only in commonly controlled accounts. The FIA stressed the need for the agency to provide guidance on the definition of a bona fide hedge position and requested that it issue guidance on the process for granting exemptions for these and other types of positions that perform similar risk-reducing functions.