The Commodity Futures Trading Commission is proposing to amend its position limits rules for security futures products (SFPs) to provide exchanges that list SFPs with greater discretion in setting limit levels, allowing the exchanges to provide a more effective risk management tool.
Specifically, the proposed CFTC amendment would: (1) increase the default level of equity SFP position limits to 25,000 (100-share) contracts, from 13,500 (100-share) contracts; and (2) modify the criteria for setting a higher level of position limits and position accountability levels.
Pursuant to the proposed amendment, a designated contract market (DCM) listing an SFP could (1) set a specific position limit level, generally equivalent to no more than 12.5 percent of estimated deliverable supply; or (2) in lieu of position limits, set position accountability levels when six-month total trading volume in the underlying security exceeds 2.5 billion shares and there are more than 40 million shares of estimated deliverable supply. In addition, the proposed amended position limit regulation would provide discretion to a DCM to apply limits to either a person’s net position or a person’s positions on the same side of the market. Finally, the CFTC proposes criteria for setting position limits on an SFP on other than an equity security, generally based on an estimate of deliverable supply.
Comments will be due 60 days after the proposal is published in the Federal Register. More information on the proposed amendment is available here.