On October 15, the Commodity Futures Trading Commission (CFTC or the Commission) adopted final rules imposing speculative position limits in derivative contracts referencing 25 agricultural, metals and energy commodities (the Final Rules). These limits are the culmination of almost a decade of work from the Commission and its staff, including revising the rules after a federal court vacated its last attempt to expand speculative position limits in 2012.
The Final Rules are intended to “prevent excessive speculation” and broadly apply to positions in futures, options and economically equivalent swaps referencing the covered commodities (Covered Contracts). The Final Rules approach the exemption for bona fide hedges flexibly, to “accommodate potential future, unpredictable developments in commercial hedging practices.” This is in contrast to previous rule proposals, which were both more prescriptive and restrictive. The Final Rules also exempt certain recognized spread transactions.
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