CFTC Proposes Revised Aggregation Rules for Futures and Swaps Position Limits


Subject to certain exceptions, the CFTC’s position limit rules generally require a trader to aggregate positions in all accounts in which the trader directly or indirectly has a 10% or greater equity or ownership interest for purposes of applying speculative position limits. However, the proposed rule would, among other things, create a new “disaggregation” exemption under which a person with up to a 50% ownership or equity interest in another entity would not be required to aggregate the positions owned by such underlying entity if both parties: (1) do not have knowledge of each other’s trading decisions; (2) trade pursuant to separately developed and independent trading systems; (3) have written procedures that establish an information barrier between the two parties, including documented routing procedures, security procedures, and separate physical locations to maintain independence; (4) do not share employees that control trading decisions; and (5) do not share risk management systems.

The proposed rule would also expand the exemption from aggregation for the underwriting of securities to include ownership interests acquired through market-making activities of an affiliated broker-dealer. Finally, the proposal makes clear that passive investors in commodity pools structured as limited liability companies are eligible to rely on the “Independent Account Controller” disaggregation exemption to the same extent as passive investors in commodity pools that are structured as limited partnerships.

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Published In: Administrative Agency Updates, Finance & Banking Updates, Securities Updates

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.

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