CFTC Issues Final Regulations on Position Limits for Futures and Swaps


On October 18, the Commodity Futures Trading Commission (CFTC) issued a Final Rule codifying regulations that establish limits on speculative positions in 28 physical commodity futures contracts traded pursuant to the rules of a Designated Contract Market (DCM)[1] and economically equivalent swaps. The CFTC's Final Rule implements Section 737 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), which directed the CFTC to issue a rule limiting the amount of positions, other than bona fide hedging positions, that may be held by any person in connection with commodity futures and option contracts traded pursuant to the rules of a DCM.

Presently, the CFTC does not regulate position limits for energy commodities. Through the enactment of the Dodd-Frank Act, however, the CFTC was directed to develop a multitude of regulations through its rulemaking process for the purpose of establishing a regulatory regime applicable to the U.S. financial markets within the CFTC's jurisdiction, including the U.S. swap market. The CFTC has identified 30 areas requiring the issuance of rules, including an area relating to the establishment of position limits. As such, the CFTC's Final Rule represents another component of the CFTC's expanding regulatory authority with respect to swaps, futures, and option contracts.

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