CFTC Finalizes Futures and Swaps Position Limit Rules


The Commodity Futures Trading Commission (“CFTC”) on October 18, 2011 adopted a comprehensive set of rules addressing the incorporation of over-the-counter (“OTC”) derivatives into the CFTC’s existing position limit regime for exchange-traded futures and options (“Position Limit Rules”). The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) both expanded the CFTC’s jurisdiction to include surveillance and enforcement authority in the OTC markets and mandated certain regulatory changes to implement that authority. The Position Limit Rules are largely a response to that mandate.

The Commodity Exchange Act directs the CFTC to set limits on trading in the commodity markets to curb “excessive speculation” and ensure the price discovery function of those markets. Because most commodities (especially agricultural, metals, and energy com-modities) are of finite supply, it is possible that, if one trader controls a significant portion of the market, that trader could cause “sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity” which burden the cash commodity markets whose participants use the derivative markets to manage risk. To that end, the CFTC uses position limits to limit the number of positions any trader can hold in a commodity contract for the same delivery period. Position limits also play a role in the CFTC’s efforts to prevent manipulation in the commodity markets.

Please see full update below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.