On December 5, the Commodity Futures Trading Commission voted to repropose position limits for futures and swap positions. On the same day, the CFTC also approved final aggregation rules for futures and option contracts on nine agricultural commodities.
With minor modifications, the final aggregation rules follow the proposed rules that were published for comment in September 2015. Among other provisions, the rules provide that an entity owning 10 percent or more of another entity will be required to aggregate the owned entity’s positions, unless the entity meets the requirements for an exemption set out in the rules and files a timely claim for an exemption with the CFTC. The rule does not grandfather entities that are currently disaggregating positions. Therefore, it would appear that such entities will be required to file a claim for an exemption by the effective date of the rules, i.e., 60 days following publication in the Federal Register.
Designated contract markets (DCMs) and swap execution facilities (SEFs) will be required to conform their aggregation policies to the CFTC aggregation rules.
After proposing position limits in 2013 and releasing a supplemental proposal in June of 2016, the CFTC re-proposed position limits for 25 core physical commodity futures contracts and their economically equivalent futures, options and swaps (referenced contracts). The re-proposal does not address three cash-settled contracts (Class III Milk, Feeder Cattle, and Lean Hogs) initially included in the 2013 proposal.
The re-proposal contains exemptions for bona fide hedging (as newly defined) and exchange recognition of non-enumerated bona fide hedging positions, certain anticipatory hedge positions, and spread exemptions. The re-proposal also specifies acceptable practices for DCMs and SEFs to set position limits for the referenced contracts. As currently proposed, DCMs and SEFs without access to position information on swaps would be temporarily relieved from the obligation to establish position limits.
Finally, the re-proposal contains revised reporting requirements under CFTC regulations.
The CFTC press release announcing the final aggregation rules and the reproposed position limits is available here.