CFTC Holds Hearings on Proposed Rules that Would Impose Limits on Energy Positions and Hedge Exemptions

January 14, 2010

The CFTC considered a proposed rule that would impose energy position limits and hedge exemptions on regulated futures exchanges, derivatives transaction execution facilities and electronic trading facilities.  Under the proposal, the CFTC would impose Federal position limits in several energy futures contracts.  Under the scheme, there would be limits on the number of futures contracts a single entity may hold in all CFTC-regulated exchanges.  The CFTC, however, cannot impose limits on exchanges outside the its jurisdiction. Instead of fixed size limits, the new rule would set limits annually by a formula based on the total number of contracts open in those markets.  The proposed formula for setting position limits allows a single trader up to 10% of the first 25,000 contracts and up to 2.5% of the open interest beyond 25,000 contracts across all CFTC regulated markets.

The CFTC intends to look into a similar proposal for precious metals in March.

Click to access  webcast of the hearings.


Exchange-Traded Funds (ETFs), Regulatory