On December 21, 2018, the Division of Market Oversight (DMO) of the Commodity Futures Trading Commission issued Letter 18-33 responding to a request for relief from compliance with certain position aggregation requirements under CFTC Regulation 150.4(b)(2)(i)(D).

CFTC Regulation 150.4(b)(2) provides an owned-entity exemption from aggregation. Any person with an ownership or equity interest in an owned entity of 10 percent or greater generally need not aggregate the accounts or positions of the owned entity with any other account or position such person is required to aggregate, provided that such person and the owned entity meet the conditions (A) through (E) of 150.4(b)(2)(i) (firewall conditions). Subparagraph (D) of the regulation prohibits the sharing of employees that control the trading decisions of either the person or the owned entity.

The request for no-action sought relief where the relevant parties would otherwise be in compliance with the position aggregation requirements in 150.4(b)(2), but for the fact that the parties comply with criterion (D) only in connection with derivatives trading. The parties argued that the term “trading decisions” in criterion (D) should be limited to derivatives trading, instead of covering a variety of activities in different markets for global enterprises (including cash-market trading decisions).

DMO issued this no-action relief letter, which will remain in effect until 12:01 a.m. eastern standard time on August 12. The no-action relief provided by this letter is limited to the firewall condition for the owned entity exemption in 150.4(b)(2)(i)(D) related to the cash-market trading decisions. The relief does not address issues related to aggregation for other purposes under the Commodity Exchange Act and regulations, including manipulation or other abusive practices.

The CFTC Letter 18-33 is available here.