FIA special report: CFTC proposes changes to Position Limit Aggregation rules

22 September 2015

The Commodity Futures Trading Commission on Sept. 22 approved a "supplement" to its proposed changes to the agency's policy on aggregation, which determines the degree to which related entities are required to combine their positions when calculating whether they are in compliance with position limits.

CFTC Chairman Tim Massad said the supplemental proposal was designed to "simplify" the exemption process and create a "more practical, efficient rule." He added that the supplement does not alter the standard for when aggregation is required.

Massad also noted that the CFTC is continuing its work on a final rule establishing a new federal regime for position limits on commodity futures and economically equivalent commodity swaps. "I want to underscore that the Commission appreciates the importance and complexity of these issues, and we intend to take the time necessary to get it right," he said in a statement. "We hope to have more to say about issues related to position limits in the coming months."

The approval was announced in conjunction with a meeting of the CFTC's Agricultural Advisory Committee. Participants discussed the agency's position limit rules, focusing in particular on the process for granting hedge exemptions. Officials from CME Group and ICE Futures US discussed their processes for evaluating requests for hedge exemptions under the current position limit regime, and encouraged the CFTC to consider delegating this authority to the exchanges in the final position limit rules. Massad said in his opening statement to the committee that he was "open to considering" this idea and asked for input from the committee.

The supplement to the aggregation policy, which was backed unanimously by the three CFTC Commissioners, revises how the CFTC would address situations where one entity owns more than 50% of another entity. In most cases their positions would have to be combined under the CFTC's aggregation policy, but in November 2013 the CFTC proposed allowing companies that meet certain standards showing that they operate independently to apply for permission to disaggregate their positions.

Under the supplement, companies would not have to apply to the CFTC for permission to disaggregate. Instead they would be allowed to file a notice with the CFTC stating that they have met the required standards.

CFTC Commissioner Chris Giancarlo commented in a statement that the revised approach "better recognizes the varied corporate structures" of market participants and would relieve the CFTC of a burden on its already limited resources. Giancarlo also invited market participants to comment on whether some information sharing among affiliates should be allowed without triggering the aggregation requirement.

Comments are due 45 days after publication in the Federal Register.

Text of the Supplement

Statements at the Agricultural Advisory Committee Meeting

  • FIA
  • Commodities
  • Position Limits