Stroock Special Bulletin
"CFTC Issues Proposed Regulations Regarding Position Limits for Derivatives"
The CFTC has issued the Proposed Rules regarding position limits for derivatives under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). The Dodd-Frank Act requires that the CFTC establish position limits for certain physical commodity and related cash-settled derivatives. The Proposed Rules establish position limits and limit formulas for 28 futures and option contracts executed pursuant to the rules of DCMs (the "Core Referenced Futures Contracts") and physical commodity swaps that are economically equivalent to such DCM contracts (such contracts, together with the Core Referenced Futures Contracts, the "Referenced Contracts").
The CFTC is also proposing aggregate position limits that will apply across different trading venues to contracts based on the same underlying commodity. In selecting the Core Referenced Futures Contracts, the CFTC focused on those commodity contracts that (i) have high levels of open interest and significant notional value or (ii) otherwise may provide a reference price for a significant number of cash market transactions.
This Stroock Special Bulletin highlights the major provisions of the Proposed Rules.