Vol. 78 Friday, 

No. 221 November 15, 2013 

Part III 

Commodity Futures Trading Commission 

17 CFR Part 150 

Aggregation of Positions; Proposed Rule 


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68946 Federal Register / Vol. 78, No. 221 / Friday, November 15, 2013 / Proposed Rules 

1 7 U.S.C. 1 et seq. 

2See 17 CFR part 150. Part 150 of the 

Commission’s regulations establishes federal 

position limits on certain enumerated agricultural 

contracts; the listed commodities are referred to as 

enumerated agricultural commodities. 

3See 17 CFR 150.2. 

4See 17 CFR 150.3. 

5See 17 CFR 150.4. 

6See 17 CFR 150.4(a) and (b). 

7See 17 CFR 150.4(c). 

8See 17 CFR 150.4(d). 

9See 17 CFR 150.3(a)(4). 

10See 17 CFR 150.3(b) and 150.4(e). 

11See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 111–203, 124 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 150 

RIN 3038–AD82 

Aggregation of Positions 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: On May 30, 2012, the 

Commodity Futures Trading 

Commission (‘‘Commission’’ or 

‘‘CFTC’’) published in the Federal 

Register a notice of proposed 

modifications to part 151 of the 

Commission’s regulations. The 

modifications addressed the policy for 

aggregation under the Commission’s 

position limits regime for 28 exempt 

and agricultural commodity futures and 

options contracts and the physical 

commodity swaps that are economically 

equivalent to such contracts. In an 

Order dated September 28, 2012, the 

District Court for the District of 

Columbia vacated part 151 of the 

Commission’s regulations. The 

Commission is now proposing 

modifications to the aggregation 

provisions of part 150 of the 

Commission’s regulations that are 

substantially similar to the aggregation 

modifications proposed to part 151, 

except that the modifications address 

the policy for aggregation under the 

Commission’s position limits regime for 

futures and option contracts on nine 

agricultural commodities set forth in 

part 150. Separately, the Commission is 

also proposing today to establish 

speculative position limits for the 28 

exempt and agricultural commodity 

futures and options contracts and the 

physical commodity swaps that are 

economically equivalent to such 

contracts that previously had been 

covered by part 151 of its regulations. If 

both proposals are finalized, the 

modifications proposed here to the 

aggregation provisions of part 150 

would apply to the position limits 

regimes for both the futures and option 

contracts on nine agricultural 

commodities and the 28 exempt and 

agricultural commodity futures and 

options contracts and the physical 

commodity swaps that are economically 

equivalent to such contracts. However, 

the Commission may determine to adopt 

the modifications proposed here 

separately from any other amendment to 

the position limits regime. 

DATES: Comments must be received on 

or before January 14, 2014. 

ADDRESSES: You may submit comments, 

identified by RIN number 3038–AD82, 

by any of the following methods: 

• Agency Web site: http://

comments.cftc.gov; 

• Mail: Melissa D. Jurgens, Secretary 

of the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW., 

Washington, DC 20581; 

• Hand delivery/courier: Same as 

mail, above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow 

instructions for submitting comments. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to http://

www.cftc.gov. You should submit only 

information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that may be exempt from disclosure 

under the Freedom of Information Act, 

a petition for confidential treatment of 

the exempt information may be 

submitted according to the procedures 

established in CFTC regulations at 17 

CFR part 145. 

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, filter, redact, refuse or 

remove any or all of your submission 

from http://www.cftc.gov that it may 

deem to be inappropriate for 

publication, such as obscene language. 

All submissions that have been redacted 

or removed that contain comments on 

the merits of the rulemaking will be 

retained in the public comment file and 

will be considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under the Freedom of Information Act. 

FOR FURTHER INFORMATION CONTACT: 

Stephen Sherrod, Senior Economist, 

Division of Market Oversight, (202) 418– 

5452, ssherrod@cftc.gov; Riva Spear 

Adriance, Senior Special Counsel, 

Division of Market Oversight, (202) 418– 

5494, radriance@cftc.gov; or Mark 

Fajfar, Assistant General Counsel, Office 

of General Counsel, (202) 418–6636, 

mfajfar@cftc.gov; Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Introduction 

The Commission has long established 

and enforced speculative position limits 

for futures and options contracts on 

various agricultural commodities as 

authorized by the Commodity Exchange 

Act (‘‘CEA’’).1 The part 150 position 

limits regime,2 generally includes three 

components: (1) The level of the limits, 

which set a threshold that restricts the 

number of speculative positions that a 

person may hold in the spot-month, 

individual month, and all months 

combined,3 (2) exemptions for positions 

that constitute bona fide hedging 

transactions and certain other types of 

transactions,4 and (3) rules to determine 

which accounts and positions a person 

must aggregate for the purpose of 

determining compliance with the 

position limit levels.5

The Commission’s existing 

aggregation policy under regulation 

150.4 generally requires that unless a 

particular exemption applies, a person 

must aggregate all positions for which 

that person controls the trading 

decisions with all positions for which 

that person has a 10 percent or greater 

ownership interest in an account or 

position, as well as the positions of two 

or more persons acting pursuant to an 

express or implied agreement or 

understanding.6 The scope of 

exemptions from aggregation include 

the ownership interests of limited 

partners in pooled accounts,7

discretionary accounts and customer 

trading programs of futures commission 

merchants (‘‘FCM’’),8 and eligible 

entities with independent account 

controllers that manage customer 

positions (‘‘IAC’’ or ‘‘IAC exemption’’).9

Market participants claiming one of the 

exemptions from aggregation are subject 

to a call by the Commission for 

information demonstrating compliance 

with the conditions applicable to the 

claimed exemption.10

B. Proposed Modifications to the Policy 

for Aggregation Under Part 151 of the 

Commission’s Regulations 

The Commission adopted part 151 of 

its regulations in November 2011 under 

the authority of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (‘‘Dodd-Frank Act’’), which 

President Obama signed on July 21, 

2010.11 Title VII of the Dodd-Frank 


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Stat. 1376 (2010). The text of the Dodd-Frank Act 

may be accessed at http://www.cftc.gov/

LawRegulation/DoddFrankAct/index.htm. 

12Pursuant to section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 

13See Position Limits for Futures and Swaps, 76 

FR 71626 (Nov. 18, 2011). In an Order dated 

September 28, 2012, the District Court for the 

District of Columbia vacated part 151 of the 

Commission’s regulations, with the exception of the 

revised position limit levels in amended section 

150.2. See International Swaps and Derivatives 

Association v. United States Commodity Futures 

Trading Commission, 887 F. Supp. 2d 259 (D.D.C. 

2012). 

In a separate proposal approved on the same date 

as this proposal, the Commission is proposing to 

establish speculative position limits for 28 exempt 

and agricultural commodity futures and option 

contracts, and physical commodity swaps that are 

‘‘economically equivalent’’ to such contracts (as 

such term is used in section 4a(a)(5) of the CEA). 

In connection with establishing these limits, the 

Commission is also proposing to update some 

relevant definitions; revise the exemptions from 

speculative position limits, including for bona fide 

hedging; and extend and update reporting 

requirements for persons claiming exemption from 

these limits. See Position Limits for Derivatives 

(November 5, 2013). 

The Commission is proposing these amendments 

to regulation 150.4 and certain related regulations 

separately from its proposed amendments to 

position limits because it believes that these 

proposed amendments regarding aggregation of 

provisions could be appropriate regardless of 

whether the position limit amendments are 

adopted. The Commission anticipates that it could 

adopt these amendments related to aggregation 

separately from the amendments to the position 

limits. 

If both proposals are finalized, the modifications 

proposed here to the aggregation provisions of part 

150 would apply to the position limits regimes for 

both the futures and option contracts on nine 

agricultural commodities and the 28 exempt and 

agricultural commodity futures and options 

contracts and the physical commodity swaps that 

are economically equivalent to such contracts. 

14See notes 2 through 5, above, and 

accompanying text. 

15See notes 6 through 9, above, and 

accompanying text. 

16See regulations 151.7(g) and (i), respectively. 

17See regulation 151.7(i). 

18A copy of the petition (the ‘‘aggregation 

petition’’) can be found on the Commission’s Web 

site at www.cftc.gov/stellent/groups/public/@

rulesandproducts/documents/ifdocs/

wgap011912.pdf. The aggregation petition was 

originally filed by the Working Group of 

Commercial Energy Firms; certain members of the 

group later reconstituted as the Commercial Energy 

Working Group. Both groups (hereinafter, 

collectively, the ‘‘Working Groups’’) presented one 

voice with respect to the aggregation petition. 

19See Aggregation, Position Limits for Futures 

and Swaps, 77 FR 31767 (May 30, 2012). 

Act 12 amended the CEA to establish a 

comprehensive new regulatory 

framework for swaps and security-based 

swaps. The legislation was enacted to 

reduce risk, increase transparency, and 

promote market integrity within the 

financial system by, among other things: 

(1) Providing for the registration and 

comprehensive regulation of swap 

dealers and major swap participants; (2) 

imposing clearing and trade execution 

requirements on standardized derivative 

products; (3) creating robust 

recordkeeping and real-time reporting 

regimes; and (4) enhancing the 

Commission’s rulemaking and 

enforcement authorities with respect to, 

among others, all registered entities and 

intermediaries subject to the 

Commission’s oversight. 

As amended by the Dodd-Frank Act, 

sections 4a(a)(2) and 4a(a)(5) of the CEA 

authorize the Commission to establish 

limits for futures and option contracts 

traded on a designated contract market 

(‘‘DCM’’), as well as swaps that are 

economically equivalent to such futures 

or options contracts traded on a DCM. 

In response to this new authority, the 

position limits regime adopted in part 

151 would have applied to 28 physical 

commodity futures and option contracts 

and physical commodity swaps that are 

economically equivalent to such 

contracts.13 The regulations in the part 

151 position limits regime are in three 

components that are generally similar to 

the three components of part 150.14

With regard to determining which 

accounts and positions a person must 

aggregate, regulation 151.7 largely 

adopted the Commission’s existing 

aggregation policy under regulation 

150.4.15 Regulation 151.7, however, also 

provided additional exemptions for 

underwriters of securities, and for 

where the sharing of information 

between persons would cause either 

person to violate federal law or 

regulations adopted thereunder.16 With 

the exception of the exemption for 

underwriters, regulation 151.7 required 

market participants to file a notice with 

the Commission demonstrating 

compliance with the conditions 

applicable to each exemption.17

On May 30, 2012, the Commission 

proposed, partially in response to a 

petition for interim relief from part 

151’s provision for aggregation of 

positions across accounts,18 certain 

modifications to its policy for 

aggregation under the part 151 position 

limits regime (the ‘‘Part 151 Aggregation 

Proposal’’).19 In brief, the Part 151 

Aggregation Proposal included the 

following five elements. 

First, the Commission proposed to 

amend regulation 151.7(i) to make clear 

that the exemption from aggregation for 

situations where the sharing of 

information was restricted under law 

would include circumstances in which 

the sharing of information would create 

a ‘‘reasonable risk’’ of a violation—in 

addition to an actual violation—of 

federal law or regulations adopted 

thereunder. The Commission also 

proposed extending the exemption to 

situations where the sharing of 

information would create a ‘‘reasonable 

risk’’ of a violation of state law or the 

law of a foreign jurisdiction. But the 

Commission did not propose to modify 

the requirement that market participants 

file an opinion of counsel to rely on the 

exemption in regulation 151.7(i). 

Second, the Commission proposed 

regulation 151.7(b)(1), which would 

establish a notice filing procedure to 

permit a person in specified 

circumstances to disaggregate the 

positions of a separately organized 

entity (‘‘owned entity’’), even if such 

person has a 10 percent or greater 

interest in the owned entity. The notice 

filing would need to demonstrate 

compliance with certain conditions set 

forth in proposed regulation 

151.7(b)(1)(i), and such relief would not 

be available to persons with a greater 

than 50 percent ownership or equity 

interest in the owned entity. Similar to 

other exemptions from aggregation, the 

Commission would be able to 

subsequently call for additional 

information as well as reject, modify or 

otherwise condition such relief. Further, 

such person would be obligated to 

amend the notice filing in the event of 

a material change to the circumstances 

described in the filing. The proposed 

criteria to claim relief in proposed 

regulation 151.7(b)(1)(i) would have 

required a demonstration that the 

person filing for disaggregation relief 

and the owned entity do not have 

knowledge of the trading decisions of 

the other; that they trade pursuant to 

separately developed and independent 

trading systems; that they have, and 

enforce, written procedures to preclude 

one entity from having knowledge of, 

gaining access to, or receiving data 

about, trades of the other; that they do 

not share employees that control trading 

decisions and that employees do not 

share trading control with respect to 

both entities; and that they do not have 

risk management systems that permit 

the sharing of trades or trading strategies 

with the other. 

Third, the Commission proposed 

regulation 151.7(j), which would allow 

higher-tier entities to rely upon a notice 

for exemption filed by the owned entity, 

but such reliance would only go to the 

accounts or positions specifically 

identified in the notice. The proposed 

regulation also would require that a 

higher-tier entity that wishes to rely 

upon an owned entity’s exemption 

notice must comply with conditions of 

the applicable aggregation exemption 

other than the notice filing 

requirements. 

Fourth, the Commission proposed an 

aggregation exemption in proposed 


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20The written comments are available on the 

Commission’s Web site at http://comments.cftc.gov/ 

PublicComments/CommentList.aspx?id=1208. 

21For additional background on part 150 and part 

151 and the existing provisions for aggregation, see 

the Part 151 Aggregation Proposal. 

regulation 151.7(g) for an ownership 

interest of a broker-dealer registered 

with the SEC, or similarly registered 

with a foreign regulatory authority, in 

an entity based on the ownership of 

securities acquired as part of reasonable 

activity in the normal course of business 

as a dealer. However, the proposed 

exemption would not have applied 

where a broker-dealer acquires more 

than a 50 percent ownership interest in 

another entity. 

Fifth, the Commission proposed to 

expand the definition of independent 

account controller to include the 

managing member of a limited liability 

company, so that ‘‘regulation 4.13 

commodity pools’’ (i.e., a commodity 

pool, the operator of which is exempt 

from registration under regulation 4.13) 

established as limited liability 

companies would be accorded the same 

treatment as such pools formed as 

limited partnerships. 

The Commission received 

approximately 26 written comments on 

the Part 151 Aggregation Proposal.20

II. Proposed Rules 

The Commission is now proposing to 

amend regulation 150.4, and certain 

related regulations, to include rules to 

determine which accounts and positions 

a person must aggregate that are 

substantially similar to the 

corresponding rules in part 151, as it 

was proposed to be amended in May 

2012. In addition, the amendments now 

being proposed to regulation 150.4 

reflect the Commission’s consideration 

of the comments that were received on 

the Part 151 Aggregation Proposal. 

Thus, the discussion below covers the 

amendments in the Part 151 Aggregation 

Proposal, the comments on those 

proposed amendments, and the 

amendments that the Commission is 

now proposing.21

A. Proposed Rules on the Information 

Sharing Restriction 

B.1. Part 151 Proposed Approach— 

Amendment to Regulation 151.7(i) 

As noted above, regulation 151.7(i) 

provided exemptions from aggregation 

under certain conditions where the 

sharing of information would cause a 

violation of Federal law or regulation. 

These exemptions had not previously 

been available. In the Part 151 

Aggregation Proposal, the Commission 

proposed to amend regulation 151.7(i) 

to make clear that the exemption to the 

aggregation requirement would include 

circumstances in which the sharing of 

information would create a ‘‘reasonable 

risk’’ of a violation—in addition to an 

actual violation—of federal law or 

regulations adopted thereunder. The 

Commission noted that whether a 

reasonable risk exists would depend on 

the interconnection of the applicable 

statute and regulatory guidance, as well 

as the particular facts and circumstances 

as applied to the statute and guidance. 

The proposed amendments to part 

151 retained the requirement that 

market participants file an opinion of 

counsel to rely on the exemption in 

regulation 151.7(i). The Commission 

explained that requiring an opinion 

would allow Commission staff to review 

the legal basis for the asserted regulatory 

impediment to the sharing of 

information, and would be particularly 

helpful where the asserted impediment 

arises from laws or regulations that the 

Commission does not directly 

administer. Further, Commission staff 

would have the ability to consult with 

other federal regulators as to the 

accuracy of the opinion, and to 

coordinate the development of rules 

surrounding information sharing and 

aggregation across accounts. The 

Commission also noted that the 

proposed clarification regarding a 

‘‘reasonable risk’’ of violation should 

address the concerns that obtaining an 

opinion of counsel could be difficult if 

the Commission read the existing 

standard to include only per se 

violations. 

The Commission also noted that, 

notwithstanding the Commission’s facts 

and circumstances review of potentially 

conflicting federal laws or regulations, 

the exemption in regulation 151.7(i) 

would be effective upon filing of the 

notice required in regulation 151.7(h) 

and opinion of counsel. Further, these 

provisions authorized the Commission 

to request additional information 

beyond that contained in the notice 

filing, and the Commission may amend, 

suspend, terminate or otherwise modify 

a person’s aggregation exemption upon 

further review. Last, the Commission 

noted that as it gained further 

experience with the exemption for 

federal law information sharing 

restriction in regulation 151.7(i), it 

anticipated providing further guidance 

to market participants. 

a. Part 151 Proposed Rules for 

Information Sharing Restriction— 

Foreign Law 

For the same reasons the Commission 

adopted the exemption for federal 

information sharing restrictions, the 

Commission proposed extending the 

exemption to the law of a foreign 

jurisdiction. In addition, similar to the 

clarification for the exemption for 

federal law information sharing 

restriction, the Commission also 

proposed an exemption where the 

sharing of information creates a 

‘‘reasonable risk’’ of violating the law of 

a foreign jurisdiction. However, the 

Commission remained concerned that 

certain market participants could 

potentially use the existing and 

proposed expansion of the exemption in 

regulation 151.7(i) to evade the 

requirements for the aggregation of 

accounts. In this regard, the proposed 

amendment to part 151, consistent with 

the exemption for federal law 

information sharing restriction, 

included the requirement to file an 

opinion of counsel specifically 

identifying the particular law and facts 

requiring a market participant to claim 

the exemption. 

The Commission noted that the 

aggregation petition references 

information sharing restrictions that 

arise from ‘‘international’’ law, and the 

Commission sought comment on the 

types of ‘‘international’’ law, if any, 

which could create information sharing 

restrictions other than the law of a 

foreign jurisdiction. The Commission 

asked if the regulation 151.7(i) 

exemption should include 

‘‘international’’ law or whether it was 

sufficient to refer to the ‘‘law of a 

foreign jurisdiction.’’ 

b. Part 151 Proposed Rules for 

Information Sharing Restriction—State 

Law 

The Commission also proposed to 

establish an exemption for situations 

where information sharing restrictions 

could trigger state law violations. In 

addition, similar to the clarification 

related to information sharing 

restrictions under federal law, the 

Commission also proposed that the state 

law information sharing restriction 

apply where the sharing of information 

creates a ‘‘reasonable risk’’ of violating 

the state law. However, as noted above, 

the Commission remained concerned 

about the potential for evasion within 

the context of this exemption. In this 

regard, the Part 151 Aggregation 

Proposal, consistent with the federal 

law information sharing restriction, 

included the requirement to file an 

opinion of counsel specifically 

identifying the restriction of law and 

facts particular to the market participant 

claiming the exemption. 

The clarification and expansion of the 

violation of law exemption in the Part 

151 Aggregation Proposal addressed 


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22Aggregation petition at 24. 

23See, e.g., 18 CFR 1c.1 and 1c.2. 

24Aggregation petition at 24. 

25 Institute for Agriculture and Trade Policy on 

June 29, 2012 (‘‘CL–IATP’’). 

26CL–IATP. 

27EEI on June 29, 2012 (‘‘CL–EEI’’), FIA on June 

29, 2012 (‘‘CL–FIA’’), International Swaps and 

Derivatives Association and Securities Industry and 

Financial Markets Association, jointly on June 29, 

2012 (‘‘CL–ISDA/SIFMA’’). 

28American Gas Association on June 29, 2012 

(‘‘CL–AGA’’), American Petroleum Institute on June 

29, 2012 (‘‘CL–API’’), Atmos Energy Holdings on 

June 29, 2012 (erroneously dated July 29, 2012) 

(‘‘CL–Atmos’’), CL–EEI, CL–FIA, Coalition of 

Physical Energy Companies on June 29, 2012 (‘‘CL– 

COPE’’). 

29CL–API, Working Group of Commercial Energy 

Firms and Sutherland Asbill & Brennan LLP, on 

behalf of The Commercial Energy Working Group, 

jointly on June 29, 2012 (‘‘CL–WGCEF’’). 30CL–FIA, Private Equity Growth Capital Council 

on June 29, 2012 (‘‘CL–PEGCC’’). 31CL–AGA, Alternative Investment Management 

Association Limited on July 6, 2012 (‘‘CL–AIMA’’), 

CL–Atmos. 32Better Markets, Inc. on June 29, 2012 (‘‘CL– 

Better Markets’’), CL–IATP. 33CL–Better Markets, CL–IATP. 34CL–API, CL–EEI, CL–FIA, CL–ISDA/SIFMA, 

CL–PEGCC, CL–WGCEF. 35CL–API, CL–EEI, CL–FIA, CL–ISDA/SIFMA, 

CL–PEGCC, CL–WGCEF. Commenters also said that 

persons should be able to rely on a general legal 

opinion (as compared to a legal opinion or 

memorandum prepared specifically for that person) 

with respect to laws that impose a broadly 

applicable prohibition of information sharing. 

36CL–AIMA. 

concerns raised in the aggregation 

petition. First, the clarification and 

extension of the violation of law 

exemption responded to concerns that 

market participants could face increased 

liability under state, federal and foreign 

law. While the aggregation petition and 

other commenters argued that an owned 

non-financial entity exemption would 

reduce the risk of liability under 

antitrust and other laws, the 

clarification and expansion in the Part 

151 Aggregation Proposal would also 

reduce risk of liability under antitrust or 

other laws by allowing market 

participants to avail themselves of the 

violation of law exemption in those 

circumstances where the sharing of 

information created a reasonable risk of 

violating the above mentioned bodies of 

law. 

The Commission solicited comments 

as to the appropriateness of extending 

the information sharing exemption to 

state law. The Commission also 

considered, as an alternative, a case-bycase approach, through petitions 

submitted pursuant to CEA section 

4a(a)(7), where the Commission would 

otherwise rely upon the preemption of 

state law in administering its 

aggregation policy. 

The Commission noted that the 

aggregation petition cites to Texas 

Public Utility Code Substantive Rule 

25.503, which provides that ‘‘a market 

participant shall not collude with other 

market participants to manipulate the 

price or supply of power.’’ 22 That 

provision applies to intra-state 

transactions and resembles regulations 

of the Federal Energy Regulatory 

Commission.23 In this regard, the 

Commission asked if it should limit 

application of the proposed exemption 

for state law information sharing 

restrictions to laws that have a 

comparable provision at the federal 

level, and what criteria it should use in 

identifying state laws that a person may 

rely upon for an exemption from 

aggregation. The Commission also 

solicited additional comment as to the 

types of state laws, including specific 

laws, which could create an information 

sharing restriction in conflict with the 

Commission’s aggregation policy. 

The Commission further noted that 

the aggregation petition seeks to extend 

the exemption to information sharing 

restrictions that arise from ‘‘local’’ 

law.24 However, the aggregation petition 

did not provide examples of local laws 

that could create restrictions on 

information sharing, and the 

Commission was concerned that an 

exemption for local law would be 

difficult to implement due to the large 

number of such laws and/or regulations 

that would need to be considered and 

the vast numbers of localities that might 

issue such laws and/or regulations. 

The Commission solicited comment 

as to the appropriateness of extending 

the information sharing exemption to 

‘‘local’’ law. Commenters were asked to 

provide the scope of local law and 

identify any specific laws that create 

information sharing restrictions that 

would conflict with the Commission’s 

aggregation policy. The Commission 

also asked what criteria it could use in 

identifying local laws that a person may 

rely upon for an exemption from 

aggregation, and if the Commission 

should adopt a case-by-case approach 

through petitions submitted pursuant to 

CEA section 4a(a)(7) and otherwise rely 

upon the preemption of local law in 

administering its aggregation policy. 

2. Commenters’ Views 

One commenter said that the 

information sharing exemption should 

not be expanded, but should instead be 

limited to violations of federal law.25

This commenter also said that the 

exemption from aggregation for 

potential violations should not be 

included, because it is impractical to 

determine if potential violations 

actually justify disaggregation, and that 

if the exemption is expanded, only 

‘‘foreign law,’’ not ‘‘international law,’’ 

should be a basis for the exemption 

since international law (such as a treaty) 

is not directly applicable to information 

sharing.26

Other commenters said that the 

proposed exemptions for information 

sharing requirements under state or 

foreign law are appropriate, and that a 

‘‘reasonable risk’’ of violation is the 

right standard for the exemptions.27

Commenters also said that requirements 

under state law should be a valid basis 

for an exemption regardless of whether 

a comparable federal law exists, and 

even if federal law pre-empts state 

law.28 These commenters cited state 

utility regulations and state regulation 

of local gas distribution companies as 

examples of the types of state laws that 

could prohibit information sharing. 

Without citing any examples of such 

laws that may restrict information 

sharing, two commenters said that local 

law should also be a valid basis for an 

exemption.29

Regarding which types of legal 

provisions should be treated as ‘‘state 

law,’’ commenters said it should 

include state statutes, regulations and 

common law (including, e.g., fiduciary 

duties under common law),30 and rules, 

regulations, administrative rulings and 

court orders imposed by state 

commissions or other governmental 

authorities with jurisdiction.31

Addressing the requirement of an 

opinion of counsel, some commenters 

said that the requirement in the existing 

rule should not be changed.32 These 

commenters reasoned that the 

presumption should be that aggregation 

is required in all but the most clear-cut 

cases, and for those cases an opinion 

would be available.33

Other commenters said that a 

memorandum of law prepared by 

internal or external counsel should 

suffice if it sets out a legal basis for the 

exemption.34 These commenters 

generally pointed out that formal legal 

opinions can be expensive to obtain, 

typically contain many qualifications, 

and otherwise are not a practical means 

of advancing the goals mentioned in the 

Part 151 Aggregation Proposal.35 One 

commenter said that as an alternative to 

a memorandum of law, a person 

claiming the exemption should be 

allowed simply to provide a copy of the 

court order, administrative ruling or 

other document showing the prohibition 

of information sharing.36

3. Proposed Rule 

The Commission is proposing to 

adopt rule 150.4(b)(8), which is largely 


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37 In addition, in those instances where local law 

would impose an information sharing restriction 

that is not present under state or federal law, the 

Commission believes that it could be inappropriate 

to favor the local law serving a local purpose to the 

detriment of the position limits under federal law 

that serve a national purpose. 

similar to rule 151.7(i) as it was 

proposed to be amended. The 

Commission notes that many of the 

commenters agreed that the proposed 

amendment to part 151 appropriately 

required that the sharing of information 

create ‘‘a reasonable risk that either 

person could violate state or federal law 

or the law of a foreign jurisdiction, or 

regulations adopted thereunder.’’ Based 

on the comments received and further 

consideration, the Commission does not 

believe it is necessary that the person 

show that a comparable federal law 

exists in order for a state law to be the 

basis for an exemption. 

The Commission has carefully 

considered the comments asserting that 

local law and international law should 

be a basis for the exemption. However, 

the Commission does not believe that 

this would be appropriate. First, the 

Commission notes that the commenters 

were divided on this point, and only 

some supported incorporating local law 

and international law into the 

exemption. With regard to local law, the 

Commission continues to believe, as 

stated in the Part 151 Aggregation 

Proposal, that an exemption for local 

law would be difficult to implement due 

to the number of laws and regulations 

that would need to be considered and 

the number of localities that might issue 

them. Also, even though the number of 

such laws and regulations may be large, 

the Commission is not persuaded that 

there would be a significant number of 

instances where these laws and 

regulations would prohibit information 

sharing that would otherwise be 

permitted under federal and state law.37

In this respect, the Commission notes 

that even commenters supportive of 

including exceptions for local law did 

not cite any local laws that restrict the 

information sharing necessary to 

comply with the Commission’s 

aggregation policy. Furthermore, the 

Commission is concerned that 

reviewing notices of exemptions based 

on local laws would create a substantial 

administrative burden for the 

Commission. That is, balancing the 

possibility that including local law as a 

basis for the exemption would be 

helpful to market participants against 

the possibility that doing so would lead 

to confusion or inappropriate results, 

the Commission preliminarily 

concludes that the better course is not 

to provide for local law to be a basis for 

the exemption. 

With regard to international law, the 

Commission is persuaded by the 

commenter who pointed out that the 

sources of international law, such as 

treaties and international court 

decisions, would be unlikely to include 

information sharing prohibitions that 

would not otherwise apply under 

foreign or federal law, and that therefore 

including international law as a basis 

for the exemption is unnecessary. 

The Commission’s proposed rule 

150.4(b)(8) differs from the proposed 

amendment to rule 151.7, in that instead 

of requiring a person to provide an 

opinion of counsel regarding the 

reasonable risk of a violation of law, the 

proposed rule would require the person 

to provide a written memorandum of 

law (which may be prepared by an 

employee of the person or its affiliates) 

which explains the legal basis for 

determining that information sharing 

creates a reasonable risk that either 

person could violate federal, state or 

foreign law. The Commission is 

persuaded by the commenters saying 

that requiring a formal opinion of 

counsel may be expensive and may not 

provide benefits, in terms of the 

purposes of this requirement, as 

compared to a memorandum of law. As 

noted in the Part 151 Aggregation 

Proposal, the purpose of this 

requirement is to allow Commission 

staff to review the legal basis for the 

asserted regulatory impediment to the 

sharing of information (which should be 

particularly helpful when the asserted 

impediment arises from laws that the 

Commission does not directly 

administer), to consult with other 

regulators as to the accuracy of the 

assertion, and to coordinate the 

development of rules surrounding 

information sharing and aggregation. 

The Commission expects that a written 

memorandum of law would, at a 

minimum, contain information 

sufficient to serve these purposes. 

The Commission preliminarily 

believes that if there is a reasonable risk 

that persons in general could violate a 

provision of federal, state or foreign law 

of general applicability by sharing 

information associated with position 

aggregation, then the written 

memorandum of law may be prepared 

in a general manner (i.e., not 

specifically for the person providing the 

memorandum) and may be provided by 

more than one person in satisfaction of 

the requirement. For example, the 

Commission is aware that trade 

associations commission law firms to 

provide memoranda on various legal 

issues of concern to their members. 

Under the proposed rule, such a 

memorandum (i.e., one that sets out in 

detail the basis for concluding that a 

certain provision of federal, state or 

foreign law of general applicability 

creates a reasonable risk of violation 

arising from information sharing) could 

be provided by various persons to 

satisfy the requirement, so long as it is 

clear from the memorandum how the 

risk applies to the person providing the 

memorandum. 

On the other hand, the Commission is 

not persuaded that, as suggested by 

some commenters, simply providing a 

copy of the law or other legal authority 

would be sufficient, because this would 

not set out the basis for a conclusion 

that the law creates a reasonable risk of 

violation if the particular person 

providing the document shared 

information associated with position 

aggregation. If the effect of the law is 

clear, the written memorandum of law 

need not be complex, so long as it 

explains in detail the effect of the law 

on the person’s information sharing. 

Proposed rule 150.4(b)(8) also reflects 

the addition of a parenthetical clause to 

clarify that the types of information that 

may be relevant in this regard may 

include, only by way of example, 

information reflecting the transactions 

and positions of a such person and the 

owned entity. The Commission believes 

it is helpful to clarify in the rule text 

what types of information may 

potentially be involved. The mention of 

transaction and position information as 

examples of this information is not 

intended to limit the types of 

information that may be relevant. 

Finally, the Commission preliminarily 

believes that the question of what legal 

authorities, in particular, constitute 

‘‘state law’’ or ‘‘foreign law,’’ where it is 

relevant, is a question to be addressed 

in the written memorandum of law. In 

general, any state-level or foreign legal 

authority that is binding on the person 

could be a basis for the exemption. 

The Commission solicits comment as 

to all aspects of proposed rule 

150.4(b)(8). In particular, the 

Commission solicits comment as to the 

appropriateness of requiring that a 

person provide a written memorandum 

of law, rather than an opinion of 

counsel, regarding the reasonable risk of 

a violation of law. Also, what types of 

information may potentially be the 

subject of the sharing that is of concern 

in this rule? 

C. Ownership of Positions Generally 

1. Part 151 Proposed Approach 

The Part 151 Aggregation Proposal 

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38See also note 41, below, and accompanying 

text. 

39The Commission codified this aggregation 

threshold in its 1979 statement of policy on 

aggregation, which was derived from the 

administrative experience of the Commission’s 

predecessor. See Statement of Policy on 

Aggregation of Accounts and Adoption of Related 

Reporting Rules (‘‘1979 Aggregation Policy’’), 44 FR 

33839, 33843 (June 13, 1979). Note, however, that 

consistent with the approach taken in 151.7(d), 

proposed rule 150.4(d) will separately require 

aggregation of investments in accounts with 

identical trading strategies. 

40See, e.g., 53 FR 13290, 13292 (1988) (proposal). 

The 1988 proposal for the independent account 

controller rule requested comment on the 

possibility of a broader passive investment 

exemption, and specifically noted: 

[Q]uestions also have been raised regarding the 

continued appropriateness of the Commission’s 

aggregation standard which provides that a 

beneficial interest in an account or positions of ten 

percent or more constitutes a financial interest 

tantamount to ownership. This threshold financial 

interest serves to establish ownership under both 

the ownership criterion of the aggregation standard 

and as one of the indicia of control under the 1979 

Aggregation Policy. 

In particular, certain instances have come to the 

Commission’s attention where beneficial ownership 

in several otherwise unrelated accounts may be 

greater than ten percent, but the circumstances 

surrounding the financial interest clearly exclude 

the owner from control over the positions. The 

Commission is requesting comment on whether 

further revisions to the current Commission rules 

and policies regarding ownership are advisable in 

light of the exemption hereby being proposed. If 

such financial interests raise issues not addressed 

by the proposed exemption for independent 

account controllers, what approach best resolves 

those issues while maintaining a bright-line 

aggregation test? 

41See 77 FR 31767, 31773. This incremental 

approach to account aggregation standards reflects 

the Commission’s historical practice. See, e.g., 53 

FR 41563, 41567, Oct. 24, 1988 (the definition of 

eligible entity for purposes of the IAC exemption 

originally only included CPOs, or exempt CPOs or 

pools, but the Commission indicated a willingness 

to expand the exemption after a ‘‘reasonable 

opportunity’’ to review the exemption.); 56 FR 

14308, 14312, Apr. 9, 1991 (the Commission 

expanded eligible entities to include commodity 

trading advisors, but did not include additional 

entities requested by commenters until the 

Commission had the opportunity to assess the 

current expansion and further evaluate the 

additional entities); and 64 FR 24038, May 5, 1999 

(the Commission expanded the list of eligible 

entities to include many of the entities commenters 

requested in the 1991 rulemaking). 

standing incremental approach to 

exemptions from the aggregation 

requirement for persons owning a 

financial interest in an entity. The Part 

151 Aggregation Proposal highlighted 

the relevant statutory language of 

section 4a(a)(1) of the CEA, which 

requires aggregation of an entity’s 

positions on the basis of either 

ownership or control of the entity, and 

the related legislative history and 

regulatory developments which support 

the Commission’s approach. In addition, 

the Part 151 Aggregation Proposal also 

explained that the Commission’s 

historical practice has been to craft 

narrowly-tailored exemptions, when 

and if appropriate, to the basic 

requirement of aggregation when there 

is either ownership or control of an 

entity.38

Regarding the threshold level at 

which an exemption from aggregation 

on the basis of ownership would be 

available, the Commission noted in the 

Part 151 Aggregation Proposal that it has 

generally found that an ownership or 

equity interest of less than 10 percent in 

an account or position that is controlled 

by another person who makes 

discretionary trading decisions does not 

present a concern that such ownership 

interest results in control over trading or 

can be used indirectly to create a large 

speculative position through ownership 

interests in multiple accounts. As such, 

the Commission has exempted an 

ownership interest below 10 percent 

from the aggregation requirement.39

Prior comments discussed in the Part 

151 Aggregation Proposal suggested that 

a similar analysis should prevail for an 

ownership interest of 10 percent or 

more where such ownership represents 

a passive investment that does not 

involve control of the trading decisions 

of the owned entity, because such 

passive investments would present a 

reduced concern that ownership would 

result in trading pursuant to direct or 

indirect control, as well as a reduced 

risk for persons with positions in 

multiple accounts to hold an unduly 

large overall position. 

While other Commission rulemakings 

prior to the Part 151 Aggregation 

Proposal generally restricted 

exemptions from aggregation based on 

ownership to FCMs, limited partner 

investors in commodity pools, and 

independent account controllers 

managing customer funds for an eligible 

entity, a broader passive investment 

exemption has previously been 

considered but not enacted by the 

Commission.40 Further, the Commission 

reiterated its belief in incremental 

development of aggregation exemptions 

over time.41 Consistent with that 

incremental approach, the Commission 

considered the additional information 

provided and the concerns raised by the 

aggregation petition, and proposed relief 

from the ownership criteria of 

aggregation. 

The Part 151 Aggregation Proposal 

would have established a notice filing 

procedure to permit a person with an 

ownership or equity interest in a 

separately organized entity (‘‘owned 

entity’’) of 10 percent or greater, but no 

more than 50 percent, to disaggregate 

the positions of the owned entity in 

specified circumstances. Under that 

proposal, the notice filing would 

demonstrate compliance with certain 

conditions set forth in the proposed 

amendment to part 151. Similar to other 

exemptions from aggregation, the notice 

filing would be effective upon 

submission to the Commission, but the 

Commission would be able to 

subsequently call for additional 

information as well as reject, modify or 

otherwise condition such relief. Further, 

such person would be obligated to 

amend the notice filing in the event of 

a material change to the circumstances 

described in the filing. 

a. Initial Proposed Ownership 

Threshold for Disaggregation Relief 

The proposed amendment to part 151 

would have conditioned disaggregation 

relief on a demonstration that the 

person does not have greater than a 50 

percent ownership or equity interest in 

the owned entity. The Part 151 

Aggregation Proposal explained that an 

equity or ownership interest above 50 

percent constitutes a majority 

ownership or equity interest of the 

owned entity and is so significant as to 

require aggregation under the ownership 

prong of Section 4a(a)(1) of the CEA. As 

noted in the Part 151 Aggregation 

Proposal, the proposed amendment to 

part 151 would have provided certainty 

and an easily administrable bright-line 

test, and would have addressed 

concerns about circumvention of 

position limits by coordinated trading or 

direct or indirect influence between 

entities. To the extent that the majority 

owner may have the ability and 

incentive to direct, control or influence 

the management of the owned entity, 

the proposed bright-line test would be a 

reasonable approach to the aggregation 

of owned accounts pursuant to Section 

4a(a)(1). A person with a greater than 50 

percent ownership interest in multiple 

accounts would have the ability to hold 

and control a significant and potentially 

unduly large overall position in a 

particular commodity, which position 

limits are intended to prevent. 

The owned entity exemption in the 

Part 151 Aggregation Proposal would 

have applied to both financial and nonfinancial entities that have passive 

ownership interests. Market participants 

that qualify for the exemption could file 

a notice with the Commission 

demonstrating independence between 

entities and, thereafter, forgo the 

development of monitoring and tracking 

systems for the aggregation of accounts. 

The Commission sought comment as to 

whether such passive interests present a 

significantly reduced risk of coordinated 

trading compared to owned entities that 

fail the criteria for the proposed 


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68952 Federal Register / Vol. 78, No. 221 / Friday, November 15, 2013 / Proposed Rules 

42 In the aggregation petition, the Working Groups 

asserted that entities should be permitted to share 

‘‘attorneys, accountants, risk managers, compliance 

and other mid- and back-office personnel.’’ 

Aggregation petition at Exhibit A. 

43See proposed rule 151.7(h)(1)(ii), 77 FR 31767, 

31782. 

44 In this regard, the Commission clarified that a 

material change would include, among other 

events, if the person making the original 

certification is no longer employed by the company. 

See also CEA sections 6(c)(2) and 9(a)(3). 

45The Commission noted that this list was not 

meant to be exhaustive of the factors that would 

indicate an exemption is warranted and should not 

be interpreted as being solely sufficient to claim the 

exemption because each filing is fact specific. And, 

exemption. In addition, the Commission 

specifically requested comment as to 

whether the proposed relief should be 

limited to ownership interests in nonfinancial entities. 

While the owned non-financial entity 

exemption mentioned in the aggregation 

petition would permit disaggregation 

even if the owned entity is wholly 

owned, the Commission was concerned 

that an ownership interest greater than 

50 percent presents heightened 

concerns for coordinated trading or 

direct or indirect influence over an 

account or position, and that permitting 

disaggregation at that level of ownership 

would be inconsistent with the statutory 

requirement to aggregate on the basis of 

ownership. The Part 151 Aggregation 

Proposal noted that while small 

ownership interests of less than 10 

percent do not warrant aggregation, and 

although 10 percent or greater 

ownership has served as a useful 

threshold for aggregation, the 

Commission believed relief may be 

warranted for passive investments above 

10 percent. However, for the reasons 

discussed above, aggregation would be 

inappropriate where an ownership 

interest is greater than 50 percent. 

Therefore, the Commission proposed 

limiting the availability of the 

exemption to those having an 

ownership interest no greater than 50 

percent. 

b. Initial Proposed Criteria for 

Disaggregation Relief 

The proposed criteria to claim relief 

under the proposed amendment to part 

151 addressed the Commission’s 

concerns that an ownership or equity 

interest of 10 percent and above may 

facilitate or enable control over trading 

of the owned entity or allow a person to 

accumulate a large position through 

multiple accounts that could overall 

amount to an unduly large position. The 

Part 151 Aggregation Proposal grouped 

these criteria into four general 

categories. 

First, the proposed amendment to part 

151 would have conditioned aggregation 

relief on a demonstration that the 

person filing for disaggregation relief 

and the owned entity do not have 

knowledge of the trading decisions of 

the other. The Commission noted that 

where an entity has an ownership 

interest in another entity and neither 

entity shares trading information, such 

entities demonstrate independence, but 

persons with knowledge of trading 

decisions of another in which they have 

an ownership interest are likely to take 

such decisions into account in making 

their own trading decisions. 

Second, the proposed amendment to 

part 151 would have conditioned 

aggregation relief on a demonstration 

that the person seeking disaggregation 

relief and the owned entity trade 

pursuant to separately developed and 

independent trading systems. Further, a 

demonstration that such person and the 

owned entity have, and enforce, written 

procedures to preclude the one entity 

from having knowledge of, gaining 

access to, or receiving data about, trades 

of the other, would also be required. 

Such procedures would address 

document routing and other procedures 

or security arrangements, including 

separate physical locations, which 

would maintain the independence of 

their activities. The Part 151 

Aggregation Proposal noted that these 

conditions would strengthen the 

independence between the two entities 

for the owned entity exemption. 

Third, the proposed amendment to 

part 151 would have conditioned 

aggregation relief on a demonstration 

that the person does not share 

employees that control the owned 

entity’s trading decisions, and the 

employees of the owned entity do not 

share trading control with such persons. 

The Part 151 Aggregation Proposal 

noted that, similar to the restriction on 

information sharing, the sharing of 

employees with knowledge of trading 

decisions presents a strong risk to the 

independence of trading between 

entities. In the Part 151 Aggregation 

Proposal, the Commission sought 

comment regarding whether the sharing 

of employees such as attorneys, 

accountants, risk managers, compliance 

and other mid- and back-office 

personnel compromises independence 

because it would provide each entity 

with knowledge of the other’s trading 

decisions.42

Fourth, the proposed amendment to 

part 151 would have conditioned 

aggregation relief on a demonstration 

that the person and the owned entity do 

not have risk management systems that 

permit the sharing of trades or trading 

strategies with the other. This condition, 

which is similar to a condition proposed 

in the aggregation petition, addressed 

concerns that risk management systems 

that permit the sharing of trades or 

trading strategies with each other 

present a significant risk of coordinated 

trading through the sharing of 

information. The Part 151 Aggregation 

Proposal did not include a condition 

that the risk management systems of the 

two entities be separately developed, 

and the Commission sought comment as 

to whether independence of trading 

between the two entities can be 

maintained when their risk management 

systems do not communicate trade 

information. 

c. Initial Proposed Notice Filing 

Requirement 

With regard to filing requirements for 

the exemption in the proposed 

amendment to part 151, the Commission 

noted that market participants would be 

required to file in accordance with 

regulation 151.7(h). As such, market 

participants would be required to file a 

notice with the Commission with a 

description of how they adhere to the 

criteria in the proposed amendment to 

part 151 and a certification that the 

conditions are met. This certification, as 

well as any other certification made 

under regulation 151.7(h), would be 

required to be made by a senior officer 

of the market participant with 

knowledge as to the contents of the 

notice.43 Further, regulation 151.7(h)(3) 

requires market participants to promptly 

update a notice filing in the event of a 

material change of the information 

contained in the notice filing.44

With regard to the type of material 

necessary to file a notice to claim an 

exemption under the proposed 

amendment to part 151, the Commission 

noted that each submission would have 

to be specific to the facts of the 

particular entity. The person claiming 

the exemption would be required to 

provide specific facts that demonstrate 

compliance with each condition of 

relief. Such a demonstration would 

likely include an organizational chart 

showing the ownership and control 

structure of the involved entities, a 

description of the risk management 

system, a description of the informationsharing systems (including bulletin 

boards, and common email addresses of 

the entities identified), an explanation 

of how and to whom the trade data and 

position information is distributed 

(including the responsibilities of the 

individual receiving such information), 

and the officers that receive reports of 

the trade data and position 

information.45


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as noted earlier, the Commission is able to demand 

additional information regarding the exemption 

within its discretion. 

46Aggregation petition at 23. 

47For purposes of the discussion below, ‘‘highertier’’ entities include entities with a 10 percent or 

greater ownership interest in an owned entity. 

48CL–Better Markets. 

49CL–Better Markets. 

50CL–IATP. 

51 International Association of Machinists and 

Aerospace Workers on June 29, 2012 (‘‘CL– 

IAMAW’’). 

52American Benefits Council on June 29, 2012 

(‘‘CL–ABC’’), CL–AGA, CL–AIMA, CL–API, 

Barclays Capital on June 29, 2012 (‘‘CL–Barclays’’), 

Commodity Markets Council on June 29, 2012 

(‘‘CL–CMC’’), CL–COPE, CL–EEI, CL–FIA, Iberdrola 

Renewables, LLC and Iberdrola Energy Services 

LLC, jointly on June 29, 2012 (‘‘CL–Iberdrola’’), CL– 

ISDA/SIFMA, Managed Funds Association on June 

28, 2012 (‘‘CL–MFA’’) and CL–WGCEF. 

53CL–AIMA, CL–API. Two commenters’ first 

position (not an alternative position) was along 

these lines—that disaggregation relief should be 

available to the extent provided by the Commission. 

CL–Atmos, CL–MFA. 

d. Initial Proposed Treatment of Higher 

Tier Entities 

In connection with its request for the 

Commission to include an owned nonfinancial entity exemption, the 

aggregation petition also requested that 

the Commission provide relief from the 

filing requirements for claiming the 

exemption. Specifically, it argued that if 

an entity files a notice and claims the 

owned non-financial entity exemption, 

then ‘‘every higher-tier company (a 

company that holds an interest in the 

company that submitted the notice) 

need not aggregate the referenced 

contracts of the owned non-financial 

entities identified in the notice.’’ 46 After 

consideration of this request, the 

Commission proposed rules that would 

provide relief to such ‘‘higher-tier 

entities’’ within the context of a 

corporate structure.47

The proposed amendments to part 

151 would have provided that highertier entities may rely upon a notice for 

exemption filed by the owned entity, 

and such reliance would only go to the 

accounts or positions specifically 

identified in the notice. For example, if 

company A had a 30 percent interest in 

company B, and company B filed an 

exemption notice for the accounts and 

positions of company C, then company 

A could rely upon company B’s 

exemption notice for the accounts and 

positions of company C. Should 

company A wish to disaggregate the 

accounts or positions of company B, 

company A would have to file a 

separate notice for an exemption. 

The proposed amendments to part 

151 would have also provided that a 

higher-tier entity that wishes to rely 

upon an owned entity’s exemption 

notice would be required to comply 

with conditions of the applicable 

aggregation exemption other than the 

notice filing requirements. Although 

higher-tier entities would not have to 

submit a separate notice to rely upon 

the notice filed by an owned entity, the 

Commission noted that it would be able, 

upon call, to request that a higher-tier 

entity submit information to the 

Commission, or allow an on-site visit, 

demonstrating compliance with the 

applicable conditions. 

The Part 151 Aggregation Proposal 

stated that the proposed amendments to 

part 151 should significantly reduce the 

filing requirements for aggregation 

exemptions. Further, the Commission 

did not anticipate that the reduction in 

filing would impact the Commission’s 

ability to effectively surveil the proper 

application of exemptions from 

aggregation. The first filing of an owned 

entity exemption notice should provide 

the Commission with sufficient 

information regarding the 

appropriateness of the exemption, while 

repetitive filings of higher-tier entities 

would not be expected to provide 

additional substantive information. 

However, the Commission again noted 

that higher-tier entities would still be 

required to comply with the conditions 

of the exemption specified in the owned 

entity’s notice filing. 

The Commission specifically 

requested comments as to the 

appropriateness of the owned entity 

exemption as well as the conditions 

applicable to the exemption, and 

whether the Commission should add 

additional criteria and if so, what 

criteria and why. The Commission also 

asked if it should require market 

participants to submit additional 

information to claim the exemption, and 

if so, what information and why. With 

regard to the owned entity exemption, 

the Commission asked if it should alter 

the scope of the exemption, and if so, 

how it should be altered and why. 

Further, the Commission asked 

commenters to address the percentage 

ownership interest, if any, at which a 

market participant should no longer be 

able to claim the exemption in the 

proposed amendments to part 151, and 

whether there are specific 

circumstances in which a percentage of 

ownership higher than 50 percent 

would be appropriate to claim the 

exemption notwithstanding the 

concerns described above regarding 

coordinated trading, direct or indirect 

influence, and significantly large and 

potentially unduly large overall 

positions in a particular commodity. In 

addition, the Commission invited 

comment on the owned non-financial 

entity exemption set forth in appendix 

A of the aggregation petition as an 

alternative to the proposed owned entity 

exemption. 

2. Commenters’ Views 

a. Comments on the Initial Proposed 

Ownership Threshold for Disaggregation 

Relief 

Some commenters supported the 

proposed rules requiring that, to obtain 

relief from the aggregation requirement, 

a person must own 50 percent or less of 

an owned entity. One commenter said 

that unless the standards for an 

independent account controller are met, 

any exemption from aggregation for 

greater than 50 percent-owned entities 

would constitute an unacceptable 

weakening of the position limits 

regime.48 This commenter also noted 

that CEA section 4a(a)(1) requires 

aggregation of positions held by any 

persons ‘‘directly or indirectly’’ 

controlled by a person, and ‘‘ownership 

is the paradigm example of indirect 

control.’’ 49

Two commenters said that the 

proposed rules went too far in allowing 

exemptions from aggregation. These 

commenters were concerned that the 

exemptions in the Part 151 Aggregation 

Proposal could impede prevention of 

excessive speculation on agricultural 

futures, which requires the imposition 

of position limits based on consistent 

aggregation of positions,50 and that 

allowing owners of more than 10 

percent of another entity not to 

aggregate could ‘‘potentially spark 

additional ‘herd-like’ behavior, thus 

causing another commodities futures 

boom-bust cycle.’’ 51

The other commenters on the Part 151 

Aggregation Proposal said that the 

requirement of ownership of 50 percent 

or less of the owned entity should not 

apply, and disaggregation relief should 

be available to any person 

demonstrating that the owned entity’s 

trading is independent according to 

criteria along the lines of proposed rule 

151.7(b)(1)(i).52 Some of these 

commenters also said that, as an 

alternative to providing relief for any 

person that could demonstrate 

independent trading by the owned 

entity, disaggregation relief should be 

available to the extent specifically 

provided by the Commission in 

response to a specific request for 

relief,53 or if the person makes an 

additional demonstration of why 

majority ownership of the owned entity 

does not result in trading control or 

information sharing that warrants 


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54CL–ISDA/SIFMA, CL–WGCEF, CL–PEGCC. 

One of these commenters said that, instead of 

requiring aggregation of positions, the Commission 

should consider requiring that additional 

safeguards be in place for majority-owned entities, 

such as requiring that both the person and the 

owned entity to make certain annual certifications. 

CL–WGCEF. 

55CL–PEGCC and Private Equity Growth Capital 

Council supplemental letter on August 20, 2012 

(‘‘CL–PEGCC Supp.’’). 

56CL–AGA, CL–MFA, CL–PEGCC, CL–WGCEF. 

57CL–API, CL–Atmos. 

58CL–ISDA/SIFMA, CL–PEGCC. 

59CL–CMC, CL–EEI. 

60CL–ISDA/SIFMA, CL–PEGCC. 

61CL–PEGCC. 

62CL–AGA, CL–API, CL–COPE. 

63CL–API, CL–WGCEF. 

64CL–AIMA. 

65CL–CMC, CL–COPE, CL–WGCEF. 

66CL–API, CL–CMC. 

67U.S. Chamber of Commerce and the Real Estate 

Roundtable, jointly on June 29, 2012 (‘‘CL– 

Chamber’’). Other commenters along these lines 

added that to requiring passive investors to 

aggregate the positions of majority-owned 

companies would inhibit legitimate commercial 

and investment activity, CL–FIA, and that 

providing relief from aggregation for passive 

investors would be similar to the lack of aggregation 

for passive owners of commodity pools. CL–PEGCC. 

68CL–AGA, CL–Iberdrola. Another commenter 

added that since the independent account 

controller exemption would generally not be 

available to holding companies owning operating 

companies, the requirement of ownership of 50 

percent or less of the owned entity in order to 

disaggregate creates a regulatory imbalance between 

such holding companies and the entities to which 

the independent account controller exemption is 

available. CL–WGCEF. 

69CL–CMC. 

70CL–Chamber. 

71CL–ABC. This commenter also asked for 

clarification whether a person that owns an entity 

that controls the trading of an employee benefit 

plan would be required to aggregate the positions 

of such plan with such person’s positions. Id. 

72CL–AGA, CL–API, CL–Atmos, CL–Cargill, CL– 

EEI. Commenters said that shared knowledge 

among employees is not relevant if they are not 

involved in trading and do not serve as conduit for 

sharing trading information, CL–AGA, CL–AIMA, 

CL–Atmos, and that it is important that risk 

management and compliance personnel have 

continuous knowledge of trading. CL–EEI. 

aggregation.54 One commenter 

representing private investment funds 

suggested rules allowing disaggregation 

relief if a person could demonstrate 

independent trading by the owned 

entity and one of three alternative 

conditions were met: (i) The owner uses 

information about the owned entity’s 

trading only for risk management, (ii) 

the owned entity only enters into bona 

fide hedging transactions, or (iii) the 

owned entity is not consolidated on the 

owner’s financial statements, 

representatives of the owner on the 

owned entity’s board of directors do not 

control the owned entity’s trading and 

the owned entity’s trading qualifies as 

bona fide hedging.55

The commenters opposed to the 

requirement of ownership of 50 percent 

or less of the owned entity provided 

various reasons for why the requirement 

should not apply. Some of these 

commenters said that although 

ownership of more than 50 percent of an 

entity is an indicator of control, such 

ownership does not always equate to 

control,56 because ownership of an 

entity does not provide control unless 

the owner has an ability to direct or 

influence management) 57 or because 

treating ownership as tantamount to 

control is contrary to principles of 

corporate separateness.58 Other 

commenters said that aggregation is 

consistent with the underlying purposes 

of the position limits regime only if a 

person has direct and actual control of 

the trading of another person or has 

access to information about the other 

entity’s trading that facilitates its own 

trading.59

Other commenters claimed that the 

requirement of ownership of 50 percent 

or less of the owned entity is 

inconsistent with the CEA or past 

practices of the Commission. These 

commenters said that while CEA section 

4a(a)(1) refers to positions held by 

‘‘controlled’’ persons, it does not refer to 

positions held by owned persons,60 that 

the Commission does not require 

aggregation of positions of owned 

commodity pools, or of positions (even 

those held by the entity itself) if there 

is an independent account controller,61

and that the ‘‘bright line’’ standard at 50 

percent ownership is arbitrary,62

inconsistent with both a 1979 policy 

statement of the Commission that 

trading control is a question of fact and 

with prior practice of DCMs to allow 

owners to demonstrate lack of control of 

an owned entity’s trading,63 or 

unnecessary in light of the 

Commission’s Part 151 Aggregation 

Proposal of factors to determine whether 

a person controls the trading of an 

owned entity.64

Another reason cited by commenters 

against the requirement of ownership of 

50 percent or less of the owned entity 

is that in certain corporate structures, 

majority ownership may not provide for 

control of the owned entity. 

Commenters said, for example, that 

limited partners may not control the 

trading of a limited partnership, even 

though they own a majority equity 

interest in the limited partnership,65 or 

a joint venture may contain contractual 

provisions that prevent the venture 

partners from controlling its trading,66

or a passive majority investor in a 

commercial company may not control 

the company’s trading.67 Commenters 

also said that it would be inappropriate 

to treat two companies that operate in 

different regions or at different levels of 

commerce (e.g., wholesale and retail) as 

trading under common control simply 

because both companies are owned by 

a common holding company.68

Commenters also described other 

factors that they believe weigh against 

the requirement of ownership of 50 

percent or less of the owned entity in 

order to disaggregate. One commenter 

said that requiring persons to aggregate 

the positions of all majority-owned 

entities would lead to more information 

sharing and coordinated trading 

between such entities, which the 

Commission should seek to prevent, and 

it would also likely lead to incorrect 

position reporting while disaggregation 

would encourage more granular and 

more accurate reporting.69 Another 

commenter was concerned that the 

Commission’s adoption of aggregation 

rules would lead DCMs and SEFs to 

apply similar aggregation rules for the 

position limits regimes that they 

enforce, thereby increasing the 

importance of the aggregation rules to a 

wider variety of firms using many 

different types of swaps.70 A commenter 

representing employee benefit plans 

said that the Commission should not 

require aggregation of the positions of a 

corporate entity that is the sponsor of an 

employee benefit plan with the 

positions of the plan even if the 

employees of the plan sponsor (or its 

subsidiaries) control the investments of 

the plan, because such employees have 

a legal duty to act solely in the interests 

of the plan.71

b. Comments on the Initial Proposed 

Criteria for Disaggregation Relief 

There were a variety of comments on 

the criteria in the proposed amendment 

to part 151 that must be met in order for 

a person to obtain disaggregation relief 

with respect to an owned entity. One 

general point raised by several 

commenters was that the limits on 

sharing information between the person 

and the owned entity should not apply 

to employees that do not direct or 

influence trading (such as attorneys or 

risk management and compliance 

personnel), although the employees may 

have knowledge of the trading of both 

the person and the owned entity.72 A 

commenter representing employee 

benefit plan managers said that 

restrictions on information sharing are, 

in general, a problem for plan managers, 

which have a fiduciary duty to inquire 

as to an owned entities’ activities, so the 

Commission should recognize that 

acting as required by fiduciary duties 


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73CL–ABC. 

74CL–AIMA, CL–EEI, CL–MFA, CL–WGCEF. 

75CL–COPE. 

76CL–WGCEF. 

77CL–API. 

78CL–AIMA. The commenter said that, in this 

case, the rule should require only that the systems 

be independently operated. 

79CL–EEI, CL–FIA. 

80CL–COPE. 

81CL–WGCEF. 

82CL–FIA. 

83CL–API, CL–EEI, CL–WGCEF. 

84CL–AIMA. 

85CL–API, CL–Cargill. 

86CL–FIA, CL–WGCEF. 

87CL–Atmos, CL–PEGCC. 

88CL–PEGCC. 89CL–FIA. 90CL–Barclays. Another commenter said that 

requiring a person owning 50 percent or less of an 

owned entity to make a filing in support of 

disaggregation relief is overly burdensome, and 

such filings should be required only if the person 

owns more than 50 percent of the owned entity. 

CL–ISDA/SIFMA. 91CL–AGA, CL–EEI, CL–FIA. 92CL–MFA. 93CL–FIA. 

does not constitute a violation of the 

information sharing restriction.73

Summarized below are the comments 

on each of the four general categories of 

criteria for disaggregation relief in the 

proposed rule. 

No shared knowledge of trading 

decisions. Commenters said that this 

proposed amendment to part 151 should 

be clarified to indicate that it prohibits 

the sharing only of knowledge held by 

personnel with the ability to direct or 

participate in trading decisions by either 

the person or the owned entity that 

would allow them to trade in 

anticipation or in concert, and that it 

allows post-trade information sharing 

for risk management, accounting, 

compliance, or similar purposes and 

information sharing among mid- and 

back-office personnel that do not control 

trading.74 Another commenter said that 

this proposed amendment to part 151 

should be clarified to provide that 

information sharing resulting when the 

person and the owned entity (or two 

owned entities) are counterparties in an 

arm’s length transaction should not be 

a violation of the rule.75

Trade pursuant to separately 

developed and independent trading 

systems; have and enforce written 

procedures to preclude sharing of 

trading information and other 

procedures to maintain independence, 

including separate physical locations. 

Commenters said that this requirement 

should not apply to commercial energy 

firms which use similar trading 

systems,76 or where existing systems 

can be modified to prevent coordinated 

trading,77 or to prevent the use of third 

party ‘‘off-the-shelf’’ execution 

algorithms.78 Other commenters said 

the requirement should apply only to 

systems that direct trading decisions, 

and not trade capture, trade risk or trade 

facilitation systems.79 One commenter 

said this provision of the proposed 

amendment to part 151 should be 

deleted, because it is the use of the 

system, not its development, which is 

relevant.80 Commenters also said that 

this proposed amendment to part 151 

should apply only with respect to 

personnel directing or participating in 

trading decisions,81 and it should 

permit the sharing of virtual 

documentation, so long as such 

document can be accessed only by 

persons that do not manage or control 

trading.82 Commenters said that the 

requirement of separate physical 

locations should not require that 

personnel be located in separate 

buildings, so long as the relevant 

employees of the person and the owned 

entity do not have access to each other’s 

physical premises.83 One commenter 

said that the requirement to have 

specified policies and procedures 

should not apply to the owned entity, 

because it does not control its owner.84

No shared employees that control 

trading decisions. Commenters on this 

proposed amendment to part 151 said it 

should not prohibit sharing of board or 

advisory committee members who do 

not influence trading decisions, sharing 

of research personnel, or sharing for 

training, operational or compliance 

purposes, so long as trading of the 

person and the owned entity remains 

independent.85

No risk management systems that 

permit shared trading. Commenters said 

that this proposed amendment to part 

151 should permit continuous sharing 

of position information so long as such 

information is used only for risk 

management and surveillance purposes 

and is not shared with trading 

personnel.86

c. Comments on the Initial Proposed 

Notice Filing Requirement 

Commenters also addressed the 

burdens that would result from the 

requirement that a filing be made to 

support disaggregation relief for persons 

owning more than 10 percent of an 

owned entity. Two commenters 

questioned the statement in the Part 151 

Aggregation Proposal that allowing 

persons that own more than 50 percent 

of an owned entity to file requests for 

disaggregation relief would be 

burdensome, saying that such filings 

would be required only if the person 

were seeking disaggregation relief, and 

that such filings could be tailored so as 

to provide the necessary information in 

an efficient way.87 One of these 

commenters also said that requiring 

private investment funds to aggregate 

positions held by majority-owned 

entities would be burdensome because 

it would lead to persons owning 

between 10 and 50 percent of the fund 

to make filings to support disaggregation 

relief.88 Another commenter said that a 

single aggregate notice filing (with 

annual updates for material changes) 

should be permitted, where the person 

would list all owned entities for which 

it claims an exemption from the 

aggregation requirement and make the 

required certifications, that the filing 

should be effective retroactively to the 

beginning of the prior filing period, and 

that affiliates at same level of ownership 

should be able to rely on each other’s 

notice filings (as do higher tier owners) 

if the filings contain the appropriate 

demonstrations of compliance by the 

affiliates.89 Last, one commenter said 

that no filing should be required to 

support disaggregation relief or, in the 

alternative, a filing should be required 

only where the absence of control of the 

owned entity is not obvious and the 

filing should not be required until 90 

days after the threshold level of 

ownership of the owned entity is 

obtained.90

d. Comments on Other Issues Relating to 

Disaggregation Relief in the Part 151 

Aggregation Proposal 

Commenters addressed several 

miscellaneous issues arising from the 

proposed amendments to part 151 

requiring ownership of 50 percent or 

less of the owned entity in order to 

disaggregate. In response to the 

Commission’s request for comment on 

whether applications for exemption 

from the aggregation requirements 

should be handled on a case-by-case 

basis, several commenters said that 

doing so would not be efficient and the 

process in the proposed rule is 

preferable.91 One commenter said that 

the final regulation on aggregation 

adopted by the Commission should also 

apply for exemptions from the 

aggregation requirements of DCMs and 

SEFs.92 Another commenter requested a 

transition period of at least six months 

after the date that compliance with the 

position limits regime is required before 

compliance with the aggregation 

requirements would be required.93

Several commenters said that when 

aggregation of positions are required, 

the positions should be attributed from 

the owned entity to the owner on a basis 

that is pro rata to the owner’s interest in 


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94CL–ABC, CL–Barclays, CL–FIA. 

95CL–API, CL–WGCEF. 

96CL–Barclays. 

97CL–Ja Sto. 

98 7 U.S.C. 6a(a)(1). 

99See S. Rep No. 947, 90th Cong., 2 Sess. 5 (1968) 

regarding the CEA Amendments of 1968, Public 

Law 90–258, 82 Stat. 26 (1968). This Senate Report 

provides: 

Certain longstanding administrative 

interpretations would be incorporated in the act. As 

an example, the present act authorizes the 

Commodity Exchange Commission to fix limits on 

the amount of speculative ‘‘trading’’ that may be 

done. The Commission has construed this to mean 

that it has the authority to set limits on the amount 

of buying or selling that may be done and on the 

size of positions that may be held. All of the 

Commission’s speculative limit orders, dating back 

to 1938, have been based upon this interpretation. 

The bill would clarify the act in this regard. . . . 

Section 2 of the bill amends section 4a(1) of the 

act to show clearly the authority to impose limits 

on ‘‘positions which may be held.’’ It further 

provides that trading done and positions held by a 

person controlled by another shall be considered as 

done or held by such other; and that trading done 

or positions held by two or more persons acting 

pursuant to an express or implied understanding 

shall be treated as if done or held by a single 

person. 

100See Administrative Determination (‘‘A.D.’’) 

163 (Aug. 7, 1957) (‘‘[I]n the application of 

speculative limits, accounts in which the firm has 

a financial interest must be combined with any 

trading of the firm itself or any other accounts in 

which it in fact exercises control.’’). In addition, the 

Commission’s predecessor, and later the 

Commission, provided the aggregation standards for 

purposes of position limits in the large trader 

reporting rules. See Supersedure of Certain 

Regulations, 26 FR 2968, Apr. 7, 1961. In 1961, then 

regulation 18.01 read: 

(a) Multiple Accounts. If any trader holds or has 

a financial interest in or controls more than one 

account, whether carried with the same or with 

different futures commission merchants or foreign 

brokers, all such accounts shall be considered as a 

single account for the purpose of determining 

whether such trader has a reportable position and 

for the purpose of reporting. 17 CFR 18.01 (1961). 

In the 1979 Aggregation Policy, the Commission 

discussed regulation 18.01, stating: 

Financial Interest in Accounts. Consistent with 

the underlying rationale of aggregation, existing 

reporting Rule 18.10(a) a (sic) basically provides 

that if a trader holds or has a financial interest in 

more than one account, all accounts are considered 

as a single account for reporting purposes. Several 

inquiries have been received regarding whether a 

nomial (sic) financial interest in an account requires 

the trader to aggregate. Traditionally, the 

Commission’s predecessor and its staff have 

expressed the view that except for the financial 

interest of a limited partner or shareholder (other 

than the commodity pool operator) in a commodity 

pool, a financial interest of 10 percent or more 

requires aggregation. The Commission has 

determined to codify this interpretation at this time 

and has amended Rule 18.01 to provide in part that, 

‘‘For purposes of this Part, except for the interest 

of a limited partner or shareholder (other than the 

commodity pool operator) in a commodity pool, the 

term ‘financial interest’ shall mean an interest of 10 

percent or more in ownership or equity of an 

account.’’ 

Thus, a financial interest at or above this level 

will constitute the trader as an account owner for 

aggregation purposes. 

1979 Aggregation Policy, 44 FR at 33843. 

The provisions concerning aggregation for 

position limits generally remained part of the 

Commission’s large trader reporting regime until 

1999 when the Commission incorporated the 

aggregation provisions into rule 150.4 with the 

existing position limit provisions in part 150. See 

64 FR 24038, May 5, 1999. The Commission’s part 

151 rulemaking also incorporated the aggregation 

provisions in rule 151.7 along with the remaining 

position limit provisions in part 151. See 76 FR 

71626, Nov. 18, 2011. 

101 17 CFR 1.3(y). This provision has been in 

Regulation 1.3(y)(1)(iv) since at least 1976, which 

the Commission adopted from regulations of its 

predecessor, with ‘‘for the most part, procedural, 

housekeeping-type modifications, conforming the 

regulations to the recently enacted CFTCA.’’ See 41 

FR 3192, 3195 (January 21, 1976). 

102See Revision of Federal Speculative Position 

Limits and Associated Rules, 64 FR 24038, 24044, 

May 5, 1999 (‘‘[T]he Commission . . . interprets the 

‘held or controlled’ criteria as applying separately 

to ownership of positions or to control of trading 

decisions.’’). See also, Exemptions from Speculative 

Position Limits for Positions which have a Common 

Owner but which are Independently Controlled and 

for Certain Spread Positions, 53 FR 13290, 13292, 

Apr. 22, 1988. In response to two separate petitions, 

the Commission proposed the independent account 

controller exemption from speculative position 

limits, but declined to remove the ownership 

standard from its aggregation policy. 

103 In this regard, the Commission is mindful of 

the point raised by some commenters that the 

aggregation rules adopted by the Commission 

would be a precedent for aggregation rules enforced 

by DCMs and SEFs, leading to the application of the 

aggregation rules to a wide variety of firms. See CL– 

Chamber. The Commission believes that for this 

reason, it is important that the aggregation rules set 

out, to the extent feasible, ‘‘bright line’’ rules that 

are capable of easy application by a wide variety 

of market participants while not being susceptible 

to circumvention. 

the owned entity, to avoid double 

counting and an artificial limit on 

trading that may affect liquidity.94 Two 

commenters addressed information that 

the Commission may request under the 

proposed amendments to part 151, 

saying they should be amended to 

specifically limit such information to 

that which is relevant to establishing 

whether a person meets the criteria for 

disaggregation and will be kept 

confidential.95

One commenter said that the 

Commission should not adopt a rule 

regarding aggregation of positions of 

owned entities and that the Commission 

should instead rely on information 

provided on reports on Commission 

Form 40, which includes information 

regarding whether the respondent 

controls, or is controlled by, any other 

entity.96 Another commenter said that 

the position limits regime is long 

overdue and there should be a general 

requirement of aggregation, with no 

exceptions or waivers.97

3. Proposed Rule 

The Commission continues to believe, 

as stated in the Part 151 Aggregation 

Proposal, that ownership of an entity is 

an appropriate criterion for aggregation 

of that entity’s positions. Section 

4a(a)(1) of the CEA provides for the 

general aggregation standard with regard 

to position limits, and specifically 

provides: 

In determining whether any person has 

exceeded such limits, the positions held and 

trading done by any persons directly or 

indirectly controlled by such person shall be 

included with the positions held and trading 

done by such person; and further, such limits 

upon positions and trading shall apply to 

positions held by, and trading done by, two 

or more persons acting pursuant to an 

expressed or implied agreement or 

understanding, the same as if the positions 

were held by, or the trading were done by, 

a single person.98

The legislative history to the enactment 

of this provision in 1968 states that 

Congress added this language to 

expressly incorporate prior 

administrative determinations of the 

Commodity Exchange Authority 

(predecessor to the Commission) into 

the statute.99 These prior administrative 

determinations, as well as regulations of 

the Commodity Exchange Authority, 

announced standards that included 

control of trading and financial interests 

in positions. As early as 1957, the 

Commission’s predecessor issued 

determinations requiring that accounts 

in which a person has a financial 

interest be included in aggregation.100 In 

addition, the definition of ‘‘proprietary 

account’’ in regulation 1.3(y), which has 

been in effect for decades, includes any 

account in which there is 10 percent 

ownership.101

In light of the language in section 4a, 

its legislative history, subsequent 

regulatory developments, and the 

Commission’s historical practices in this 

regard, the Commission continues to 

believe that section 4a requires 

aggregation on the basis of either 

ownership or control of an entity. The 

Commission also believes that 

aggregation of positions across accounts 

based upon ownership is a necessary 

part of the Commission’s position limit 

regime.102

Also, an ownership standard 

establishes a bright-line test that 

provides certainty to market 

participants and the Commission.103

Without aggregation on the basis of 

ownership, the Commission would have 

to apply a control test in all cases, 

which would pose significant 

administrative challenges to 

individually assess control across all 

market participants. Further, the 

Commission considers that if the statute 

required aggregation based only on 

control, market participants may be able 

to use an ownership interest to directly 

or indirectly influence the account or 


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104See, e.g., Position Limits for Futures and 

Swaps, 76 FR 71626, 71668 (Nov. 18, 2011) 

(describing the number of traders estimated to be 

subject to position limits). 

105 In this table, ‘‘*’’ means fewer than 4 unique 

owners exceeded the level, and ‘‘—’’ means no 

unique owner exceeded the level. 

position and thereby circumvent the 

aggregation requirement. 

The Commission does not believe, as 

suggested by some commenters, that an 

aggregation requirement would lead to 

more information sharing and 

significantly increased levels of 

coordinated speculative trading by the 

entities subject to aggregation. Among 

other things, the position limits would 

affect the trading of only the relatively 

small number of entities that hold 

positions in excess of the limits.104

For example, the following table 

shows the relatively small number of 

persons that held positions over the 

applicable limit during the period of 

January 17 to September 12, 2012. For 

comparison, the table also shows the 

number of persons with positions at a 

level in excess of 60 percent or 80 

percent of the applicable limit. It is 

important to note that this table was 

prepared by applying the current 

aggregation requirements in regulation 

150.4 without applying any of the 

current exemptions to aggregation that 

may be available. Thus, this table 

reflects the maximum number of 

persons that may hold positions of the 

level shown, assuming that no 

exemptions to aggregation apply. 

NUMBER OF UNIQUE PERSONS OVER 60, 80, AND 100 PERCENT OF LEVELS OF RULE 150.2 FEDERAL SPECULATIVE

POSITION LIMITS JANUARY 17, 2012 TO SEPTEMBER 30, 2012 105

Contract/DCM Percent of limit 

level 

Spot month Single month All months 

Total number 

of unique 

persons over 

level 

Number of 

person-days 

Total number 

of unique 

persons over 

level 

Number of 

person-days 

Total number 

of unique 

persons over 

level 

Number of 

person-days 

Chicago Board of Trade 

Corn and Mini-Corn ..... 60 97 517 22 1347 26 2289 

80 72 372 11 643 13 1069 

100 26 198 5 315 9 822 

Oats .............................. 60 * * 6 436 8 527 

80 * * * * 5 283 

100 * * * * 4 217 

Soybeans and MiniSoybeans .................. 60 59 316 33 2751 36 3044 

80 39 223 20 1580 25 1962 

100 19 102 11 979 16 1244 

Wheat and Mini-Wheat 60 19 95 33 2877 32 3181 

80 12 53 18 1660 23 2342 

100 6 32 13 1050 15 1446 

Soybean Oil ................. 60 54 211 36 3291 47 3568 

80 34 126 25 2161 32 2589 

100 12 47 14 1281 17 1551 

Soybean Meal .............. 60 26 158 33 2546 37 2690 

80 18 99 18 1480 21 1645 

100 8 45 7 895 12 930 

Kansas City Board of Trade 

Hard Winter Wheat ...... 60 10 38 6 334 7 450 

80 5 28 * * * * 

100 4 20 * * * * 

Minneapolis Grain Exchange 

Hard Red Spring Wheat 60 5 12 — — * * 

80 5 12 — — — — 

100 * * — — — — 

ICE Futures U.S. 

Cotton No. 2 ................. 60 5 31 35 3386 39 3417 

80 5 30 21 2133 25 2554 

100 5 25 14 1363 17 1701 

Also, some of the entities subject to 

aggregation, which is based on common 

ownership or control, might already 

share information regarding their 

trading activities. Thus, the Commission 

continues to believe, as it explained in 

the Part 151 Aggregation Proposal, that 

the regulations proposed here will not 

result in a significantly increased level 

of information sharing that would 

increase coordinated speculative 

trading. The Commission notes that 

these proposed regulations will provide 

further aggregation exemptions, 

lessening the need to share information 

regarding speculative trading to ensure 

compliance with position limits. 

As a final introductory point, the 

Commission has considered that relief 

from any rule requiring the aggregation 

of positions held by separate entities is 


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68958 Federal Register / Vol. 78, No. 221 / Friday, November 15, 2013 / Proposed Rules 

106The procedures adopted by the affiliates may 

obviate more complex steps such as the 

implementation of real-time monitoring software to 

consolidate all derivative activities of the affiliates, 

especially if the group currently does not have an 

aggregate position approaching the size of a 

position limit and has historically not changed 

position sizes day-over-day by a significant 

percentage of the position limit. 

107An even more cautious approach would be for 

the holding company to limit the overall allocation 

to the subsidiaries to less than 100% of the position 

limit. For example, a holding company with three 

subsidiaries may assign each subsidiary an internal 

limit equal to 30% of the level of the federal limit. 

Thus, the holding company has allocated 

permission to subsidiaries to hold, in the aggregate, 

positions equal to up to 90% of the level of the 

relevant position limit. Each subsidiary would 

simply report at close of business its derivative 

position to the holding company. The 10% cushion 

provides the holding company with the ability to 

remain in compliance with the limit, even if all 

subsidiaries slightly exceed the internal limits on 

the same side of the market at the same time. 

108For purposes of aggregation, the Commission 

believes that contingent ownership rights, such as 

an equity call option, would not constitute an 

ownership or equity interest. 

109Under the approach proposed here, and in a 

manner similar to current regulation, if a person 

qualifies for disaggregation relief, the person would 

nonetheless have to aggregate those same accounts 

or positions covered by the relief if they are held 

in accounts with substantially identical trading 

strategies. See proposed rule 150.4(a)(2). The 

exemptions in proposed rule 150.4 are set forth as 

alternatives, so that, for example, the applicability 

of the exemption in paragraph (b)(2) would not 

affect the applicability of a separate exemption from 

aggregation (e.g., the independent account 

controller exemption in paragraph (b)(5)). 

110The Commission notes that, as stated in the 

Part 151 Aggregation Proposal, the requirement in 

proposed rule 150.4(b)(2) of aggregation based on 

ownership depends on a person’s ownership 

interest in another entity, regardless of the person’s 

voting control of that entity. However, as discussed 

further below, the Commission believes that relief 

from the aggregation requirement may be 

appropriate in some circumstances, where the 

owned entity is not consolidated on the owner’s 

financial statements. Since the extent of the owner’s 

voting interest in the owned entity may be a factor 

in determining whether financial consolidation is 

required, the voting interest may indirectly be a 

factor in determining if aggregation is required. 

111 15 U.S.C. 18(a); see also 16 CFR 801.1(b) 

(defining ‘‘control’’ for purpose of implementing 

regulations to include ‘‘[h]olding 50 percent or 

more of the outstanding voting securities of an 

issuer or, in the case of any unincorporated entity, 

having the right to 50 percent or more of the profits 

of the entity, or having the right in the event of 

dissolution to 50 percent or more of the assets of 

the entity’’); Premerger Notification; Reporting and 

Waiting Period Requirements, 43 FR 33450, 33457 

(July 31, 1978) (‘‘ ‘Control’ was defined at the level 

of 50 percent stock ownership for two reasons. 

First, it supplied an objective, easily administrable 

criterion. Second, except for cases in which the 

holding is exactly 50 percent, majority ownership 

will always enable the holder to direct the day-today activities of the controlled entity, even though 

for many large corporations, de facto control may 

arise from holdings well below 50 percent’’). 

only necessary where the entities would 

be below the relevant limits on an 

individual basis, but above a limit when 

aggregated. Thus, if a group of affiliated 

entities can take steps to maintain an 

aggregate position that does not exceed 

any limit, then the group will not have 

to seek disaggregation relief. 

In other words, seeking disaggregation 

relief is one option for those groups of 

affiliated entities that may exceed a 

limit on an aggregate basis but will 

remain below the relevant limits on an 

individual basis. Other avenues are also 

available to corporate groups that seek 

to remain in compliance with the 

position limit regime. For example, the 

affiliated entities may put into place 

procedures to avoid exceeding the limits 

on an aggregate basis.106 One potential 

approach that could be available to a 

holding company with multiple 

subsidiaries would be to assign each 

subsidiary an internal limit based on a 

percentage of the level of the position 

limit. The holding company would 

allocate no more in aggregate internal 

limits than the level of the position 

limit.107 Further, a breach of an internal 

limit would provide the holding 

company with notice that it should 

consider filing for bona fide hedging 

exemptions or taking other compliance 

steps, as applicable. 

a. Disaggregation Relief for Ownership 

or Equity Interests of 50 Percent or Less 

The Commission is proposing to 

adopt rule 150.4(b)(2), which is largely 

similar to proposed rule 151.7(b)(1). 

Proposed rule 150.4(b)(2) would 

continue the Commission’s 

longstanding rule that persons with 

either an ownership or an equity 

interest in an account or position of less 

than 10 percent need not aggregate such 

positions solely on the basis of the 

ownership criteria, and persons with a 

10 percent or greater ownership interest 

would still generally be required to 

aggregate the account or positions.108

However, rule 150.4(b)(2) would 

establish a notice filing procedure, 

effective upon submission, to permit a 

person with either an ownership or an 

equity interest in an owned entity of 50 

percent or less to disaggregate the 

positions of an owned entity in 

specified circumstances, even if such 

person has a 10 percent or greater 

interest in the owned entity.109 The 

notice filing would have to demonstrate 

compliance with certain conditions set 

forth in proposed rule 150.4(b)(2). As 

discussed in the Part 151 Aggregation 

Proposal, and similar to other 

exemptions from aggregation, the notice 

filing would be effective upon 

submission to the Commission, but the 

Commission would be able to 

subsequently call for additional 

information, and to amend, terminate or 

otherwise modify the person’s 

aggregation exemption for failure to 

comply with the provisions of rule 

150.4(b)(2). Further, the person would 

be obligated to amend the notice filing 

in the event of a material change to the 

circumstances described in the filing. 

The Commission preliminarily 

believes that a 50 percent limit on the 

ownership interest in another entity is 

a reasonable, ‘‘bright line’’ standard for 

determining when aggregation of 

positions is required, even where the 

ownership interest is passive. As 

explained in the Part 151 Aggregation 

Proposal, majority ownership (i.e., over 

50 percent) is indicative of control, and 

this standard addresses the 

Commission’s concerns about 

circumvention of position limits by 

coordinated trading or direct or indirect 

influence between entities. To the 

extent that a majority owner would have 

the ability and incentive to direct, 

control or influence the management of 

the owned entity, the 50 percent limit 

is a reasonable approach to the 

aggregation of owned accounts pursuant 

to Section 4a(a)(1) of the CEA. 

Aggregation based upon an ownership 

or equity interest of greater than 50 

percent is appropriate to address the 

heightened risk of direct or indirect 

influence over the owned entity.110

Moreover, greater than 50 percent 

ownership is a standard used by other 

government agencies and reflects a 

general understanding that ownership at 

this level poses substantial potential for 

direct or indirect control over an owned 

entity. For example, the U.S. Federal 

Trade Commission and U.S. Department 

of Justice use a 50 percent ownership 

threshold test to determine ‘‘control’’ for 

the purpose of defining pre-merger and 

acquisition filing requirements under 

the Hart-Scott-Rodino Antitrust 

Improvements Act of 1974.111

The Commission notes that a 

requirement of ownership of 50 percent 

or less of the owned entity in order to 

obtain disaggregation relief by making a 

notice filing would not affect a person’s 

ability to obtain other exemptions. For 

example, exemptions from position 

limits for bona fide hedging positions or 

from aggregation for independent 

account controllers, if applicable, would 

still be utilized to the extent an owned 

entity is entering into positions for bona 

fide hedging or on behalf of customers, 

as provided in those exemptions. 

Regarding those commenters who said 

that if an owned entity’s positions are 

aggregated with the owner’s position, 

the aggregation should be pro rata to the 

ownership interest, the Commission 

believes that a pro rata approach could 

be administratively burdensome for 

both owners and the Commission. For 


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112See note 103 and accompanying text, supra. 

example, the level of ownership interest 

in a particular owned entity may change 

over time for a number of reasons, 

including stock repurchases, stock 

rights offerings, or mergers and 

acquisitions, any of which may dilute or 

concentrate an ownership interest. 

Thus, it may be burdensome to 

determine and monitor the appropriate 

pro rata allocation on a daily basis. 

Moreover, the Commission has 

historically interpreted the statute to 

require aggregation of all the relevant 

positions of owned entities, absent an 

exemption. This is consistent with the 

view that a holder of a significant 

ownership interest in another entity 

may have the ability to influence all the 

trading decisions of the entity in which 

such ownership interest is held. 

The Commission invites commenters 

to address whether the Commission 

should adopt an approach that would 

require aggregation of only a pro-rata 

allocation of owned-entity positions to 

equity owners based on the percentage 

of ownership interest. How could 

aggregation in a manner pro rata to the 

ownership interest be effected in 

practice? What procedures could be 

used to implement a pro rata method, 

and what would those procedures 

entail? If procedures to implement a pro 

rata method are suggested, please 

address the burden those procedures 

could place on the owners and on the 

Commission. 

The Commission also solicits 

comment on whether the Commission 

should permit a person to file a notice 

that would inform the Commission of 

that person’s ownership interest in an 

owned entity, and permit that person to 

aggregate only a pro rata allocation of 

the owned-entity’s positions based on 

that person’s less than 100 percent 

ownership. In light of the potential 

administrative burdens associated with 

the adoption of an aggregation 

methodology based on allocation pro 

rata to ownership interest, should the 

Commission provide for aggregation of 

an owned-entity’s positions to the 

owner based on ownership tiers? 

Commenters may address, for example, 

the establishment of two ownership 

tiers, one for an ownership interest of 10 

percent to 25 percent, with an 

attribution of 25 percent of the ownedentity’s positions (rather than 100 

percent of the affiliate’s position) to the 

owner, and another tier for an 

ownership interest of greater than 25 

percent to 50 percent, with an 

attribution of 50 percent of the ownedentity’s positions (rather than 100 

percent of the affiliate’s position) to the 

owner. Would a tiered approach such as 

this alleviate concerns about aggregation 

in general? What are the potential 

burdens of applying this approach? If 

this approach is implemented, should 

owners be required to file a notice with 

the Commission when the relevant 

ownership interest changes from one 

tier to another? 

Regarding those commenters who said 

that there should be a transition period 

for application of the requirement of 

ownership of 50 percent or less of the 

owned entity in order to obtain 

disaggregation relief, the Commission 

notes that this proposal would apply to 

existing position limits currently in 

effect, and as noted above, would 

provide further aggregation exemptions. 

The Commission also considered 

comments that aggregation of positions 

is unnecessary because information 

about ownership and control is 

available to the Commission through 

reports on Commission Form 40. 

However, the Commission is not 

persuaded that these reports are a 

sufficient substitute for the position 

limits regime. While these reports 

provide some information necessary for 

surveillance of positions, some owned 

entities may not file these reports. Also, 

the obligation to provide updates to the 

Commission if there are material 

changes to the relevant information, 

which is included in the proposed 

revision of rule 150.4, may not 

necessarily apply to information 

provided in the reports on Form 40. On 

a more fundamental level, the 

Commission believes that compliance 

with the position limit rules, including 

aggregation of the positions of owned 

entities, is primarily the responsibility 

of the owned entities and their owners. 

Even if the information on Form 40 

were sufficient, it would be impractical 

and inefficient for the Commission to 

use that information to monitor 

compliance with the position limit 

rules, as compared to the ability of the 

entities themselves to maintain 

compliance with the position limits. 

Similarly, the Commission is not 

persuaded by the commenter who 

asserted that aggregation of positions 

would, in general, lead to inaccurate 

reporting of positions. Rather, the 

Commission believes that the proposed 

rule would facilitate accurate reporting 

by providing a ‘‘bright line’’ rule for 

determining when aggregation is 

required.112 The Commission 

emphasizes the responsibility of those 

who are subject to the aggregation and 

position reporting requirements to 

ensure that the information required by 

the Commission’s regulations is 

provided accurately. 

b. Disaggregation Relief for Ownership 

or Equity Interests of Greater Than 50 

Percent 

The Commission continues to believe, 

as stated in the Part 151 Aggregation 

Proposal, that an equity or ownership 

interest above 50 percent constitutes a 

majority ownership or equity interest of 

the owned entity and is so significant as 

to justify aggregation under the 

ownership prong of Section 4a(a)(1) of 

the CEA. A person with a greater than 

50 percent ownership interest in 

multiple accounts would have the 

ability to hold and control a significant 

and potentially unduly large overall 

position in a particular commodity, 

which position limits are intended to 

prevent. Also, as noted above, in general 

this ‘‘bright line’’ approach would 

provide administrative certainty. 

While the Commission continues to 

believe that relief from the aggregation 

requirement should not be available 

merely upon a notice filing by a person 

who has a greater than 50 percent 

ownership or equity interest in the 

owned entity, the Commission has 

considered the points raised by 

commenters in this regard. In view of 

the comments, the Commission 

understands that in some limited 

situations disaggregation relief may be 

appropriate even for majority owners if 

the owned entity is not required to be, 

and is not, consolidated on the financial 

statement of the person, if the person 

can demonstrate that the person does 

not control the trading of the owned 

entity, based on the criteria in proposed 

rule 150.4(b)(2)(i), and if both the 

person and the owned entity have 

procedures in place that are reasonably 

effective to prevent coordinated trading. 

The person would have to demonstrate 

that it does not control the owned 

entity’s trading even though the person 

is the majority owner of the owned 

entity. 

To provide such limited relief in 

order to address issues raised by 

commenters would represent a break by 

the Commission from past practice. The 

Commission is authorized to provide 

such relief by the plenary authority 

granted to the Commission in section 

4a(a)(7) of the CEA to provide relief 

from the requirements of the position 

limits regime. 

Consequently, the proposed rules 

includes a provision (proposed rule 

150.4(b)(3)) that would permit a person 

with a greater than 50 percent 

ownership of an owned entity to apply 

to the Commission for relief from 

aggregation on a case-by-case basis. The 


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68960 Federal Register / Vol. 78, No. 221 / Friday, November 15, 2013 / Proposed Rules 

113The Commission points out that since this 

criterion requires a person to certify that the person 

does not control trading of its owned entity, the 

criterion could not be met by a natural person or 

any entity, such as a partnership, where it is not 

possible to separate knowledge and control of the 

person from that of the owned entity. 

114See Financial Accounting Standards Board 

Accounting Standards Codification Topic 810, at 

paragraphs 810–10–15–8 and 10, available at 

https://asc.fasb.org/. See also Accounting Research 

Bulletin 51 at paragraph 3 and Statement of 

Financial Accounting Standard No. 94 at paragraph 

2. 

115Thus, proposed rule 150.4(b)(3) would address 

those commenters who said that aggregation should 

not be required by limited partners who own a 

majority equity interest in a limited partnership but 

do not control its trading. Where a limited partner 

does not consolidate the limited partnership on its 

financial statements, and the other conditions of the 

proposed rule are met, the limited partner could 

apply to the Commission for relief from the 

aggregation requirement. 

116See generally CL–AGA, CL–API, CL–Chamber, 

CL–CMC, CL–Iberdrola. 

117Section 4a(a)(7) of the CEA provides authority 

to the Commission to grant relief from the position 

limits regime. 

person would be required to 

demonstrate to the Commission that: 

i. the owned entity is not required to 

be, and is not, consolidated on the 

financial statement of the person, 

ii. the person does not control the 

trading of the owned entity (based on 

criteria in rule 150.4(b)(2)(i)), with the 

person showing that it and the owned 

entity have procedures in place that are 

reasonably effective to prevent 

coordinated trading in spite of majority 

ownership,113

iii. each representative of the person 

(if any) on the owned entity’s board of 

directors attests that he or she does not 

control trading of the owned entity, and 

iv. the person certifies that either (a) 

all of the owned entity’s positions 

qualify as bona fide hedging 

transactions or (b) the owned entity’s 

positions that do not so qualify do not 

exceed 20 percent of any position limit 

currently in effect, and the person 

agrees in either case that: 

D if this certification becomes untrue 

for the owned entity, the person will 

aggregate the owned entity for three 

complete calendar months and if all of 

the owned entity’s positions qualify as 

bona fide hedging transactions during 

that time the person would have the 

opportunity to make the certification 

again and stop aggregating, 

D upon any call by the Commission, 

the owned entity(ies) will make a filing 

responsive to the call, reflecting the 

owned entity’s positions and 

transactions only, at any time (such as 

when the Commission believes the 

owned entities in the aggregate may 

exceed a visibility level), and 

D the person will provide additional 

information to the Commission if any 

owned entity engages in coordinated 

activity, short of common control 

(understanding that if there were 

common control, the positions of the 

owned entity(ies) would be aggregated). 

The Commission wishes to clarify that 

this relief would not be automatic, but 

rather would be available only if the 

Commission finds, in its discretion, that 

the four conditions above are met. Thus, 

persons applying for this relief should 

not assume that relief would be granted. 

The proposed rule would not impose 

any time limits on the Commission’s 

process for making the determination of 

whether relief is appropriately granted, 

and relief would be available only if and 

when the Commission acts on a 

particular request for relief. 

The first requirement would be that 

the owned entity is not, and is not 

required to be, consolidated on the 

financial statements of the person. The 

Commission is aware that, for most 

entities, ownership of more than 50 

percent of another entity’s voting shares 

is the point at which consolidation of 

the owned entity on the owner’s 

financial statements is required under 

U.S. Generally Accepted Accounting 

Principles (‘‘GAAP’’).114 Consequently, 

if a person holds an equity or ownership 

interest above 50 percent in another 

entity, but does not hold a greater than 

50 percent voting interest in that entity, 

it may be possible that the owned entity 

would not be required to be 

consolidated on the person’s financial 

statements and the person would, 

therefore, be able to apply to the 

Commission for relief from the 

aggregation requirement. Similarly, in 

some cases, limited partners holding a 

greater than 50 percent equity or 

ownership interest in a limited 

partnership are not required to 

consolidate the limited partnership 

because it is controlled by the general 

partner.115 Also, the Commission 

realizes that there are exceptions to the 

consolidation requirement for certain 

types of entities. For example, financial 

consolidation may also not be required 

for entities that are ‘‘investment 

companies’’ under GAAP, and certain 

broker-dealers may not be required to 

consolidate certain owned entities over 

which the broker-dealer is likely to have 

only temporary control. The 

Commission reiterates that lack of 

financial consolidation would be only 

one of the factors in determining 

whether aggregation relief would be 

granted, and even if the owned entity is 

not consolidated and other requirements 

for relief are satisfied, the Commission 

could nevertheless, in its discretion, 

determine that relief is not appropriate. 

The Commission preliminarily 

believes, based in part on points raised 

by commenters, that the presence of 

certain additional factors may, in 

particular circumstances, be favorable to 

granting relief from the aggregation 

requirement (although no such factor 

would be dispositive and the 

Commission could deny granting relief 

even in the presence of any or all such 

factors). These factors could include 

certain points raised by commenters, 

such as the owned entity being a newly 

acquired standalone business or a joint 

venture subject to special restrictions on 

control, or two different owned entities 

conducting operations at different levels 

of commerce (such as retail and 

wholesale).116 Under the proposed 

approach, the Commission would 

interpret factors such as these to be 

favorable to granting relief from the 

aggregation requirement. 

If a person with greater than 50 

percent ownership of an owned entity 

could not meet the conditions in 

proposed rule 150.4(b)(3), the person 

could apply to the Commission for relief 

from aggregation under CEA section 

4a(a)(7).117 Persons wishing to seek such 

relief should apply to the Commission 

stating the particular facts and 

circumstances that justify the relief. For 

example, if the owned entity is 

consolidated on the financial statement 

of the person, the person could describe 

the facts and circumstances which the 

person believes indicate that the person 

should not be considered to own or 

control the owned entity’s positions, 

notwithstanding that financial 

consolidation may be associated with 

ownership and control. The 

Commission notes that CEA section 

4a(a)(7) does not impose any time limits 

on the Commission’s process for 

determining whether relief under that 

section is appropriate, nor does it 

prescribe or limit the factors that the 

Commission may consider to be relevant 

in determining whether to grant relief. 

The Commission solicits comment as to 

whether relief from aggregation under 

CEA section 4a(a)(7) should be available 

to persons with greater than 50 percent 

ownership of owned entities who 

cannot meet the conditions in proposed 

rule 150.4(b)(3), and as to the facts and 

circumstances that the Commission 

should take into account in considering 

such relief. 

The Commission has considered the 

comment that a corporate entity that is 

the sponsor of an employee benefit plan 

should not be required to aggregate the 

positions of the plan with the sponsor’s 


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118CL–ABC. 

119The definition of ‘‘eligible entity’’ in 

regulation 150.1(d) includes the operator of a 

trading vehicle which is excluded from the 

definition of the term ‘‘pool’’ under regulation 4.5, 

which in turn excludes, in regulation 4.5(a)(4), the 

sponsors of most employee benefit plans. 

120As noted in the Part 151 Aggregation Proposal, 

the criteria would apply to the person filing the 

notice as well as the owned entity. In addition, for 

purposes of meeting the criteria, such ‘‘person’’ 

would include any entity that such person must 

aggregate pursuant to proposed rule 150.4. For 

example, if company A files a notice under 

proposed rule 150.4(c) for company A’s equity 

interest of 30 percent in company B, then company 

A must comply with the conditions for the 

exemption, including any entity with which 

company A aggregates positions proposed rule 

150.4. In this connection, if company A controlled 

the trading of company C, then company A’s 

150.4(c) notice filing must demonstrate that there is 

independence between company B and company C. 

121See, e.g., 1979 Aggregation Policy, 44 FR 

33839 (providing indicia of independence); CFTC 

Interpretive Letter No. 92–15 (CCH ¶ 25,381) 

(ministerial capacity overseeing execution of trades 

not necessarily inconsistent with indicia of 

independence); revision of federal speculative 

position limits, 64 FR 24038, 24044 (May 5, 1999) 

(intent in issuing final aggregation rule ‘‘merely to 

codify the 1979 Aggregation Policy, including the 

continued efficacy of the [1992] interpretative 

letter’’). 

122As noted in the Part 151 Aggregation Proposal, 

the Commission does not consider knowledge of 

overall end-of-day position information to 

necessarily constitute knowledge of trading 

decisions, so long as the position information 

cannot be used to dictate or infer trading strategies. 

As such, the knowledge of end-of-day positions for 

the purpose of monitoring credit limits for 

corporate guarantees does not necessarily constitute 

knowledge of trading information. However, the 

ability to monitor the development of positions on 

a real time basis could constitute knowledge of 

trading decisions because of the substantial 

likelihood that such knowledge might affect trading 

strategies or influence trading decisions of the 

other. 

123See regulation 150.3(a)(4) (proposed here to be 

replaced by proposed rule 150.4(b)(5)). Such 

conditions have been useful in ensuring that trading 

is not coordinated through the development of 

similar trading systems, and that procedures are in 

place to prevent the sharing of trading decisions 

between entities. 

124See, e.g., 1979 Aggregation Policy, 44 FR 

33839, 33840–1 (futures commission merchant 

(FCM) ‘‘deemed to control’’ trading of customer 

accounts in trading program where FCM gives 

Continued 

proprietary positions.118 The 

Commission notes that the sponsor of an 

employee benefit plan is an ‘‘eligible 

entity’’ as defined in regulation 

150.1(d),119 and the Commission 

preliminarily believes it is appropriate 

to provide relief in this regard that is 

similar to the provisions that apply to 

positions controlled by an IAC. In 

particular, the Commission proposes to 

treat the manager of the employee 

benefit plan as an IAC and the plan’s 

positions as client positions. To effect 

this treatment, the Commission is 

proposing amended rule 150.1(e)(5) and 

proposed rule 150.4(b)(5) that would 

allow managers of employee benefit 

plans (i.e., persons that manage a 

commodity pool, the operator of which 

is excluded from registration as a 

commodity pool operator under rule 

4.5(a)(4)) to be treated as an IAC, on the 

condition that an IAC notice filing is 

made as required under rule 150.4(c). 

The Commission emphasizes that this 

proposed relief would be limited to 

employee benefit plans. 

c. Proposed Criteria for Disaggregation 

Relief 

The Commission is proposing criteria 

to claim disaggregation relief in 

proposed rule 150.4(b)(2)(i) that are 

similar to the criteria set forth in 

proposed rule 151.7(b)(1)(i). Essentially, 

the criteria are the conditions that 

would have to be met in order for a 

person to rebut the presumption that an 

ownership or equity interest of between 

10 and 50 percent (inclusive) requires 

aggregation of the positions of the 

owned entity.120

In general, the Commission proposes 

that these criteria would be interpreted 

and applied in accordance with the 

Commissions’ past practices in this 

regard.121 In accordance with these 

precedents, the Commission would not 

expect that the criteria would impose 

requirements beyond a reasonable, 

plain-language interpretation of the 

criteria. For example, routine pre- or 

post-trade systems to effect trading on 

an operational level (such as trade 

capture, trade risk or order-entry 

systems) would not, broadly speaking, 

have to be independently developed in 

order to comply with the criteria. Also, 

employees that do not direct or 

participate in an entity’s trading 

decisions would generally not be subject 

to these requirements. A brief 

discussion of each of the five criteria in 

proposed rule 150.4(b)(2)(i) is set forth 

below. 

Proposed rule 150.4(b)(2)(i)(A) would 

condition aggregation relief on a 

demonstration that the person filing for 

disaggregation relief and the owned 

entity do not have knowledge of the 

trading decisions of the other. The 

Commission preliminarily believes that 

where an entity has an ownership 

interest in another entity and neither 

entity shares trading information, such 

entities demonstrate independence. In 

contrast, persons with knowledge of 

trading decisions of another in which 

they have an ownership interest are 

likely to take such decisions into 

account in making their own trading 

decisions, which implicates the 

Commission’s concern about 

independence and enhances the risk for 

coordinated trading.122 As noted above, 

this proposed criterion would address 

concerns regarding knowledge of 

employees who control, direct or 

participate in an entity’s trading 

decisions, and would not prohibit 

information sharing solely for risk 

management, accounting, compliance, 

or similar purposes and information 

sharing among mid- and back-office 

personnel that do not control, direct or 

participate in trading decisions. In 

response to comments on this criterion, 

the Commission wishes to clarify that 

this criterion would generally not 

require aggregation solely based on 

knowledge that a party gains during 

execution of a transaction regarding the 

trading of the counterparty to that 

transaction, nor would it encompass 

knowledge that an entity would gain 

when carrying out due diligence under 

a fiduciary duty, so long as such 

knowledge is not directly used to affect 

the entity’s trading. 

Proposed rule 150.4(b)(2)(i)(B) would 

condition aggregation relief on a 

demonstration that the person seeking 

disaggregation relief and the owned 

entity trade pursuant to separately 

developed and independent trading 

systems. Further, proposed rule 

150.4(b)(2)(i)(C) would condition relief 

on a demonstration that such person 

and the owned entity have, and enforce, 

written procedures to preclude the one 

entity from having knowledge of, 

gaining access to, or receiving data 

about, trades of the other. Such 

procedures would have to include 

document routing and other procedures 

or security arrangements, including 

separate physical locations, which 

would maintain the independence of 

their activities. As noted in the Part 151 

Aggregation Proposal, the Commission 

has applied these same conditions in 

connection with the IAC exemption to 

ensure independence of trading between 

an eligible entity and an affiliated 

independent account controller.123

Similar to the IAC exemption, proposed 

rule 150.4(b)(2) permits disaggregation 

in certain circumstances where there is 

independence of trading between two 

entities. Thus, the Commission is 

proposing the above conditions, which 

are already applicable and working well 

in the IAC context, and which are 

expected to strengthen the 

independence between the two entities 

for the owned entity exemption. 

The Commission proposes that the 

phrase ‘‘separately developed and 

independent trading systems’’ should be 

interpreted in accordance with the 

Commission’s prior practices in this 

regard.124 The Commission generally 


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specific advice or recommendations not made 

available to other customers, unless such accounts 

and programs are traded independently and for 

different purposes than proprietary accounts). 

125Compare id. at 33841. ‘‘However, the 

Commission also recognizes that purportedly 

different programs which in fact are similar in 

design and purpose and are under common control 

may be initiated in an attempt to circumvent 

speculative limit and reporting requirements.’’ 

126As noted in the Part 151 Aggregation Proposal, 

the condition barring the sharing of employees that 

control the owned entity’s trading decisions would 

include a prohibition on sharing of the types of 

employees described in the aggregation petition 

(attorneys, accountants, risk managers, compliance 

and other mid-and back-office personnel), to the 

extent such employees participate in control of the 

trading decisions of the person or the owned entity. 

For further clarification, see previous discussion 

regarding the condition under proposed rule 

150.4(b)(2)(i)(A) (conditioning aggregation relief on 

a demonstration that the person filing for 

disaggregation relief and the owned entity do not 

have knowledge of the trading decisions of the 

other, and discussing what constitutes ‘‘knowledge’’ 

for this purpose). 

127 In this respect, proposed rule 150.4(b)(2)(i)(D) 

would be consistent with the Commission’s 

Interpretive Letter No. 92–15 (CCH ¶ 25,381), where 

an employee both oversaw the execution of orders 

for a commodity pool, as well as maintained delta 

neutral option positions in non-agricultural 

commodities for the proprietary account of an 

affiliate of the sponsor of the commodity pool. The 

Commission concluded that the use of clerical 

personnel who are dual employees of both affiliates 

would not require aggregation when the clerical 

personnel engage in ministerial activities and steps 

are taken to maintain independence, such as: (i) 

Limiting trading authority so that the personnel do 

not have responsibility for the two entities’ 

activities in the same commodity; and (ii) 

separating the times at which the personnel 

conduct activities for the two entities. 

128The Commission remains concerned, as stated 

in the Part 151 Aggregation Proposal and as noted 

above, that a trading system, as opposed to a risk 

management system, that is not separately 

developed from another system can subvert 

independence because such a system could apply 

the same or similar trading strategies even without 

the sharing of trading information. 

129 In response to commenters on the Part 151 

Aggregation Proposal, the Commission clarifies that 

section 8 of the CEA would apply to the 

information that the Commission may request 

under proposed rule 150.4(c), and sets out the 

extent to which such information will be treated 

confidentially. 

does not expect that this criterion would 

prevent an owner and an owned entity 

from both using the same ‘‘off-the-shelf’’ 

system that is developed by a third 

party. Rather, the Commission’s concern 

is that trading systems (in particular, the 

parameters for trading that are applied 

by the systems) could be used by 

multiple parties who each know that the 

other parties are using the same trading 

system as well as the specific 

parameters used for trading and, 

therefore, are indirectly coordinating 

their trading.125

The requirement of ‘‘separate physical 

locations’’ in proposed rule 

150.4(b)(2)(i)(C) would not necessarily 

require that the relevant personnel be 

located in separate buildings. The 

Commission believes that the important 

factor is that there be a physical barrier 

between the personnel that prevents 

access between the personnel that 

would impinge on their independence. 

For example, locked doors with 

restricted access would generally be 

sufficient, while merely providing the 

purportedly ‘‘independent’’ personnel 

with desks of their own would not. 

Similar principles would apply to 

sharing documents or other resources. 

Proposed rule 150.4(b)(2)(i)(D) would 

condition aggregation relief on a 

demonstration that the person does not 

share employees that control the owned 

entity’s trading decisions, and the 

employees of the owned entity do not 

share trading control with such persons. 

The Commission continues to be 

concerned that, as stated in the Part 151 

Aggregation Proposal, shared employees 

with control of trading decisions may 

undermine the independence of trading 

between entities. Regarding the 

comments on the sharing of attorneys, 

accountants, risk managers, compliance 

and other mid- and back-office 

personnel, the Commission proposes, as 

noted above, that sharing of such 

personnel between entities would 

generally not compromise 

independence so long as the employees 

do not control, direct or participate in 

the entities’ trading decisions.126

Similarly, sharing of board or advisory 

committee members, research personnel 

or sharing of employees for training, 

operational or compliance purposes 

would not result in a violation of the 

criteria if the personnel do not influence 

(e.g., ‘‘have a say in’’) or direct the 

entities’ trading decisions.127

Proposed rule 150.4(b)(2)(i)(E) would 

condition aggregation relief on a 

demonstration that the person and the 

owned entity do not have risk 

management systems that permit the 

sharing of trades or trading strategies 

with the other. This condition would 

address concerns that risk management 

systems that permit the sharing of trades 

or trading strategies with each other 

present a significant risk of coordinated 

trading through the sharing of 

information.128 The Commission 

proposes that this criterion generally 

would not prohibit sharing of 

information to be used only for risk 

management and surveillance purposes, 

when such information is not used for 

trading purposes and not shared with 

employees that, as noted above, control, 

direct or participate in the entities’ 

trading decisions. Thus, sharing with 

employees who use the information 

solely for risk management or 

compliance purposes would generally 

be permitted, even though those 

employees’ risk management or 

compliance activities could be 

considered to have an ‘‘influence’’ on 

the entity’s trading. 

d. Proposed Notice Filing Requirement 

The Commission is proposing a notice 

filing requirement in proposed rule 

150.4(c) that is similar to the criteria set 

forth in proposed rule 151.7(h)(1), with 

a modification to add an application 

procedure for ownership interests of 

more than 50 percent under proposed 

rule 150.4(b)(3). The proposed rule 

contemplates that the filing under 

proposed rule 150.4(c)(1) would be 

made before the exemption from 

aggregation is needed, since the filing is 

a pre-requisite for obtaining the 

exemption. However, where a prior 

filing is impractical (such as where a 

person lacks information regarding a 

newly-acquired subsidiary’s activities), 

the Commission proposes that the filing 

under proposed rule 150.4(c)(1) should 

be made as promptly as practicable. 

Even though a filing under proposed 

rule 150.4(c)(1) may be made after an 

ownership or equity interest is acquired, 

the Commission proposes that the 

exemption from aggregation would not 

be effective retroactively because the 

filing is a pre-requisite to the 

exemption. The Commission believes 

that retroactive application of such 

filings could result in administrative 

difficulty in monitoring the scope of 

exemptions from aggregation and 

negatively affect the Commission staff’s 

surveillance efforts. 

Generally, the Commission proposes 

that entities could consolidate these 

filings in any efficient manner by, for 

example, discussing more than one 

owned entity in a single filing, so long 

as the scope of the filing is made 

clear.129 The Commission also wishes to 

emphasize that if an entity determines 

to no longer apply an exemption (or if 

an exemption is no longer available), the 

entity would be required to inform the 

Commission by making a filing under 

proposed rule 150.4(c) because this 

would constitute a material change to 

the prior filing. Of course, once an 

exemption no longer applies to an 

owned entity, the person would be 

required to subsequently aggregate the 

positions of the entity in question. 

In order to implement an application 

procedure for ownership interests of 

more than 50 percent under proposed 

rule 150.4(b)(3), as noted above, the 

Commission is also proposing proposed 

rule 150.4(c)(2), under which filings 

would not be effective until the 

Commission’s finding that the person 


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130See Position Limits for Derivatives (November 

5, 2013). 

131The textual modifications proposed here relate 

to the Commission regulations currently in effect. 

The Commission notes that its proposal regarding 

position limits includes amendments to the text of 

certain Commission regulations. See Position Limits 

for Derivatives (November 5, 2013). If both of the 

proposals are adopted, conforming technical 

changes to reflect the interplay between the two 

amendments may be necessary. 

132This modification to the rule is not intended 

to effect a substantive change. Rather, it is intended 

to state explicitly a rule that the Commission has 

applied since at least 1979. See note 100, above. 

has satisfied the conditions of proposed 

rule 150.4(b)(3). 

The Commission solicits comment as 

to all aspects of proposed rule 150.4. 

Commenters are invited to address the 

potential effects and implications of the 

proposed rule as the scope of the 

position limits regime may change in 

the future. For example, what issues or 

concerns arising from the scope and the 

requirements of the disaggregation relief 

in the proposed rule would have to be 

addressed if the Commission were to 

adopt its proposal to establish 

speculative position limits for 28 

exempt and agricultural commodity 

futures and option contracts, and 

physical commodity swaps that are 

‘‘economically equivalent’’ to such 

contracts? 130

If the Commission were to adopt its 

proposal to establish position limits on 

physical commodity swaps, are there 

any implications with respect to the 

interplay between the disaggregation 

relief in the proposed rule and the 

Commission’s other rules relating to 

swaps? For instance, the Commission 

understands that various corporate 

groups organize the swap activities of 

the affiliated entities within corporate 

groups in different ways. Some 

corporate groups centralize some or all 

swap activities in a particular affiliate, 

while in other groups the affiliates 

engage in swaps independently. Also, 

corporate groups may apply centralized 

risk management policies to varying 

degrees, which may affect how the 

affiliated entities in the group engage in 

swaps. What are the implications of the 

disaggregation relief in the proposed 

rule for the various ways that affiliated 

entities in corporate groups organize 

their swap activities? In considering the 

proposed rule, what other Commission 

rules should the Commission take into 

account and what are the implications 

of how other Commission rules may 

affect affiliated entities? Have corporate 

groups begun to organize their swap 

activities to comply with other 

Commission rules in ways that could be 

affected by the proposed rule? If so, 

what considerations should the 

Commission take into account in this 

regard? 

The Commission also solicits 

comment as to the appropriateness of 

the conditions for disaggregation relief 

in proposed rule 150.4(b), and whether 

relief should be available for persons 

that have a greater than 50 percent 

ownership or equity interest in an 

owned entity. If such relief should be 

available, is it appropriate to condition 

such relief on the owned entity not 

being, and not being required to be, 

consolidated on the financial statements 

of the owner? Is financial consolidation 

a relevant consideration in this regard? 

Why or why not? For example, is 

financial consolidation a useful proxy 

for other characteristics that are relevant 

to the position limits regime, such as 

ownership and control? 

Regarding the condition in proposed 

rule 150.4(b)(3)(iii), is it clear when an 

individual board member is considered 

the ‘‘representative’’ of a person on the 

board of directors? Are there 

modifications to this condition that 

would help to identify which board 

members should be required to make 

the certification? 

e. Proposed Revisions To Clarify 

Regulations 

In connection with the proposed 

modifications to rule 150.4, the 

Commission has reviewed whether the 

text of existing regulation 150.4 is easy 

to understand and apply. In this regard, 

the Commission notes that the existing 

regulation may be unclear, especially in 

terms of the relationship between the 

provisions of paragraphs (a) through (d) 

of the existing regulation and whether a 

particular paragraph is an exception to 

another. Also, as more different types of 

market participants have studied 

existing regulation 150.4 (and regulation 

151.7, which has similar provisions), 

both in connection with the Dodd-Frank 

Act and otherwise, questions have 

arisen about the application of the 

aggregation requirements to a wide 

variety of circumstances. The 

Commission believes it is important that 

the rules setting forth the aggregation 

requirements be clear in their 

application to both the circumstances in 

which they currently apply, and the 

various circumstances in which they 

may apply in the future. These textual 

modifications are not intended to effect 

any substantive change to the meaning 

of rule 150.4, and the Commission 

invites commenters to address whether 

any of these modifications change the 

meaning of the aggregation requirements 

in their particular circumstances.131

Therefore, the Commission is 

proposing to modify the text to clarify 

that paragraph (a) of rule 150.4 states 

the general requirement to aggregate 

positions a person may hold in various 

accounts, and paragraph (b) of the rule 

sets out the exemptions to the 

aggregation requirement that may apply. 

The Commission believes that this 

format clarifies that the exemptions in 

rule 150.4(b) are alternatives; that is, 

aggregation is not required to the extent 

that any of the exemptions in rule 

150.4(b) may apply. 

In rule 150.4(b), the Commission is 

proposing text for rule 150.4(b)(1) that is 

substantially similar to existing 

regulation 150.4(c). The Commission 

believes that stating this provision as 

the first exemption will clarify that any 

person that is a limited partner, limited 

member, shareholder or other similar 

type of pool participant holding 

positions in which the person by power 

of attorney or otherwise directly or 

indirectly has a 10 percent or greater 

ownership or equity interest in a pooled 

account or positions may apply this 

exemption. That is, if the requirements 

of this exemption are satisfied with 

respect to a person, then the person 

need not determine if the requirements 

of the exemption in paragraph (b)(2) or 

(b)(3) are satisfied. The text of 

paragraphs (b)(2) and (b)(3), in turn, 

state that they apply to persons with an 

ownership or equity interest in an 

owned entity, other than an interest in 

a pooled account which is subject to 

paragraph (b)(1). 

Proposed rule 150.4(b)(1) states that 

for any person that is a limited partner, 

limited member, shareholder or other 

similar type of pool participant holding 

positions in which the person by power 

of attorney or otherwise directly or 

indirectly has a 10 percent or greater 

ownership or equity interest in a pooled 

account or positions, aggregation of the 

accounts or positions of the pool is not 

required, except as provided in 

paragraphs (b)(1)(i), (b)(1)(ii) or 

(b)(1)(iii). Although existing regulation 

150.4(c) does not contain any explicit 

statement of this rule, the lack of an 

aggregation requirement in these 

circumstances is implicit in the existing 

regulation’s statement that aggregation 

is required only in certain specified 

circumstances. Thus, proposed rule 

150.4(b)(1)(i) states explicitly a 

principle that is implicit in the existing 

regulation.132 Paragraphs (b)(1)(i), 

(b)(1)(ii) and (b)(1)(iii) of proposed rule 

150.4 set out the circumstances in 

which aggregation requirements apply; 

these circumstances are substantially 

similar to those covered by paragraphs 


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133The revised text also includes references to a 

‘‘limited member’’ in addition to the references in 

the existing regulation to a limited partner in a 

pool. 

134Broker-dealers are those persons registered as 

such with the SEC, see 15 U.S.C. 78o, or similarly 

registered with a foreign regulatory authority. 

135The Commission specifically noted that this 

proposed exemption would not apply to registered 

broker-dealers that acquire an ownership interest in 

securities with the intent to hold for investment 

purposes. 

136The proposed rules would encompass within 

the proposed exemption a broker-dealer’s 

ownership of securities in anticipation of demand 

or as part of routine life cycle events, if the activity 

was in the normal course of the person’s business 

as a broker-dealer. 

137CL–FIA. 

138CL–FIA. 139See 63 FR 38532. 

(c)(1), (c)(2) and (c)(3) of existing 

regulation 150.4, but the text of the rule 

has been modified to simplify the 

wording of the provisions.133

Paragraphs (b)(4) to (b)(8) of rule 

150.4 set forth other exemptions that 

may apply in various circumstances. 

The exemption for certain accounts held 

by FCMs in paragraph (b)(4) is 

substantially the same as existing 

regulation 150.4(d), except that it has 

been rephrased in a form of a statement 

of when an exemption is available, 

instead of the statement in the existing 

regulation that the aggregation 

requirement applies unless certain 

conditions are met. Paragraph (b)(5) sets 

forth the exemption for accounts carried 

by an IAC that is substantially similar to 

existing regulation 150.3(a)(4). 

Paragraphs (b)(6), (b)(7) and (b)(8) set 

forth the exemptions for underwriting, 

broker-dealer activity and circumstances 

where laws restrict information sharing 

that are discussed in more detail above. 

Paragraph (b)(9) describes how highertier entities may apply an exemption 

pursuant to a notice filed by an owned 

entity. 

The Commission solicits comment as 

to whether the revised text of rule 150.4 

is easy to understand and apply. 

D. Underwriting 

1. Part 151 Proposed Approach 

As noted above, regulation 151.7(g) 

includes an exemption from aggregation 

where an ownership interest is in an 

unsold allotment of securities. In the 

Part 151 Aggregation Proposal, the 

Commission noted that the ownership 

interest of a broker-dealer 134 in an 

entity based on the ownership of 

securities acquired as part of reasonable 

activity in the normal course of business 

as a dealer is largely consistent with the 

ownership of an unsold allotment of 

securities covered by the underwriting 

exemption in regulation 151.7(g). In 

both circumstances, the ownership 

interest is likely transitory and not to 

hold for investment purposes. 

Accordingly, the Commission proposed 

to include an aggregation exemption in 

regulation 151.7(g) for such activity.135

However, the Commission noted in 

the Part 151 Aggregation Proposal that 

this exemption would not have applied 

where a broker-dealer acquires more 

than a 50 percent ownership interest in 

another entity because such acquisition 

would not be consistent with holding a 

transitory interest for the purpose of 

market making and runs a higher risk of 

coordinated trading.136 Therefore, a 

broker-dealer that acquires a greater 

than 50 percent ownership interest in 

another entity would be required to 

aggregate the positions of that entity, in 

the absence of another aggregation 

exemption. 

The Commission requested comment 

on whether ownership of stock, by a 

broker-dealer registered with the SEC or 

similarly registered with a foreign 

regulatory authority, that is acquired as 

part of reasonable activity in the normal 

course of business as a dealer, without 

other ownership interests or indicia of 

control or concerted action, warrants 

aggregation. 

2. Commenters’ Views 

FIA commented on the Part 151 

Aggregation Proposal, saying that the 

underwriting exemption should not 

require that ownership be acquired ‘‘as 

part of [the] reasonable activity’’ of a 

broker-dealer, because the normal 

course requirement is sufficient and the 

additional requirement that the 

acquisition be part of reasonable activity 

creates uncertainty.137 FIA also said that 

broker-dealers should be able to use the 

underwriting exemption for any level of 

ownership, i.e., even a more than 50 

percent ownership interest, or, 

alternatively, the ownership interests 

that a broker-dealer holds in its capacity 

as a broker-dealer should not be 

aggregated with ownership interests 

held by the broker-dealer or its affiliates 

in any other capacity.138

3. Proposed Rule 

The Commission continues to believe 

that any acquisition by a broker-dealer 

of a greater than 50 percent ownership 

interest in an owned entity (other than 

in a distribution of securities directly by 

an issuer or through an underwriter) 

requires aggregation, and further relief 

from this requirement is not 

appropriate. For example, if a brokerdealer has a 49 percent ownership 

interest in an entity and then acquires 

a 2 percent ownership interest in the 

same entity in the normal course of the 

broker-dealer’s activity, aggregation of 

the owned entity’s positions should be 

required. 

On the other hand, the Commission is 

proposing an exemption from 

aggregation where an ownership interest 

is in an unsold allotment of securities in 

proposed rule 150.4(b)(7) that is 

essentially the same as the exemption in 

regulation 151.7(g). However, proposed 

rule 150.4(b)(7) does not include the 

phrase ‘‘as part of reasonable activity,’’ 

as was suggested by a commenter on the 

Part 151 Aggregation Proposal, because 

the Commission proposes to interpret 

the phrase ‘‘reasonable activity’’ to be 

effectively synonymous with the phrase 

‘‘normal course of business’’ in this 

context. 

The Commission solicits comment as 

to all aspects of proposed rule 

150.4(b)(7). In particular, the 

Commission solicits comment as to the 

appropriateness of the proposed 

treatment of ownership interests 

acquired in the normal course of the 

broker-dealer’s activity. 

E. Independent Account Controller for 

Eligible Entities 

1. Part 151 Proposed Approach 

As noted above, regulation 150.3(a)(4) 

provides an eligible entity with an 

exemption from aggregation of the 

eligible entity’s customer accounts that 

are managed and controlled by 

independent account controllers. The 

definition of eligible entity in regulation 

150.1(d) includes ‘‘the limited partner 

or shareholder in a commodity pool the 

operator of which is exempt from 

registration under § 4.13 of this 

chapter. . . .’’ However, with regard to 

a CPO that is exempt under regulation 

4.13, the definition of an independent 

account controller in regulation 

150.1(e)(5) only extends to ‘‘a general 

partner of a commodity pool the 

operator of which is exempt from 

registration under § 4.13 of this 

chapter.’’ At the time the Commission 

expanded the IAC exemption to include 

regulation 4.13 commodity pools, 

market participants generally structured 

such pools as limited partnerships.139

The Commission understands that 

today, not all regulation 4.13 

commodity pools are formed as 

partnerships. For example, regulation 

4.13 pools may be formed as limited 

liability companies and have managing 

members, not general partners. 

Accordingly, in the Part 151 

Aggregation Proposal, the Commission 

proposed to expand the definition of 

independent account controller to 


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140CL–AIMA. 

141CL–ABC. 

142CL–ABC. 

143Section 4a(a)(7) of the CEA provides authority 

to the Commission to grant relief from the position 

limits regime. 

144A copy of the petition (the ‘‘aggregation 

petition’’) can be found on the Commission’s Web 

site at www.cftc.gov/stellent/groups/public/@

rulesandproducts/documents/ifdocs/

wgap011912.pdf. The aggregation petition was 

originally filed by the Working Group of 

Commercial Energy Firms; certain members of the 

group later reconstituted as the Commercial Energy 

Working Group. Both groups (hereinafter, 

collectively, the ‘‘Working Groups’’) presented one 

voice with respect to the aggregation petition. 

145The Commission notes that the opinions and 

beliefs expressed herein are preliminary assertions 

based on comments from previous releases, and are 

subject to change after consideration of any further 

comments. The Commission welcomes public 

comment on all aspects of this release in order to 

better inform its policy determinations. 

include the managing member of a 

limited liability company, and to amend 

the definitions of eligible entity and 

independent account controller to 

specifically provide for regulation 4.13 

commodity pools established as limited 

liability companies. 

2. Commenters’ Views 

One commenter said that the 

independent account controller rule 

should be expanded to apply to any 

person with a role equivalent to a 

general partner in a limited partnership 

or managing member of a limited 

liability company, to accommodate 

various structures that are used for 

commodity pools in jurisdictions 

outside the U.S.140

Another commenter addressed 4.13 

pools more broadly, and said that the 

Commission’s rules should treat 

ownership of 4.13 pools in the same 

way that the rules treat ownership of 

operating companies.141 In particular, 

this commenter said that the 

Commission should eliminate the 

requirement that the positions of a 4.13 

pool be aggregated with the positions of 

any person that owns more than 25% of 

the 4.13 pool.142

3. Proposed Rule 

The Commission proposes to adopt 

rule 150.4(b)(5) to take the place of the 

existing IAC rule in regulation 

150.3(a)(4), so that the IAC exemption is 

in the regulatory section providing for 

aggregation of positions. Proposed rule 

150.4(b)(5) is substantially similar to 

existing regulation 150.3(a)(4) except 

that, in response to the commenters, the 

Commission proposes to modify it (and 

the related definitions in regulation 

150.1) so that it could be applied with 

respect to any person with a role 

equivalent to a general partner in a 

limited liability partnership or a 

managing member of a limited liability 

company. 

Regarding the treatment of regulation 

4.13 pools in a manner that is 

equivalent to the treatment of operating 

companies, the Commission believes 

that this is a matter that could be the 

subject of relief granted under CEA 

section 4a(a)(7).143 Persons wishing to 

seek such relief should apply to the 

Commission stating the particular facts 

and circumstances that justify the relief. 

The Commission solicits comment as 

to all aspects of the proposed rule 

150.4(b)(5) and the related amendments 

to regulation 150.1. In particular, the 

Commission solicits comment as to the 

appropriateness of treating limited 

liability companies that are commodity 

pools in the same way as limited 

liability partnerships that are 

commodity pools. Commenters are 

invited to provide information regarding 

the considerations that determine 

whether commodity pools are, in 

practice, structured as limited liability 

companies or limited liability 

partnerships and whether there are any 

relevant differences in the two types of 

entities. Also, what are the facts and 

circumstances that commenters believe 

would justify relief under CEA section 

4a(a)(7)? 

III. Related Matters 

A. Considerations of Costs and Benefits 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders. Section 

15(a) further specifies that the costs and 

benefits shall be evaluated in light of the 

following five broad areas of market and 

public concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission considers the costs and 

benefits resulting from its discretionary 

determinations with respect to the 

section 15(a) factors. 

On May 30, 2012, the Commission 

proposed, partially in response to a 

petition for interim relief from part 

151’s provision for the aggregation of 

positions across accounts,144 certain 

modifications to its policy for 

aggregation under the part 151 position 

limits regime (the ‘‘Part 151 Aggregation 

Proposal’’). In an order dated September 

28, 2012, the District Court for the 

District of Columbia vacated part 151 of 

the Commission’s regulations. The 

Commission is now proposing 

modifications to part 150 of the 

Commission’s regulations that are 

substantially similar to the 

modifications proposed to part 151. 

The Part 151 Aggregation Proposal 

provided the public with an opportunity 

to comment on the Commission’s 

considerations of costs and benefits of 

the proposed rules. In the Part 151 

Aggregation Proposal, the Commission 

explained its position that the proposed 

changes to the aggregation policy 

would, on net, lower costs for market 

participants without lessening the 

effectiveness of the Commission’s 

position limits regime. The Commission 

requested comment on all aspects of its 

consideration of costs and benefits, 

including identification and assessment 

of any costs and benefits not discussed 

therein. In addition, the Commission 

requested that commenters provide data 

and any other information or statistics 

that they believe supports their 

positions with respect to the 

Commission’s consideration of costs 

and benefits. 

The modifications to part 150 

proposed herein reflect the 

Commission’s consideration of the 

comments that were received on the 

proposed amendments to part 151. The 

Commission summarizes the proposed 

modifications to part 150 below, 

including those provisions proposed to 

be modified or amended in response to 

public comment on the Part 151 

Aggregation Proposal, describes 

expected costs and benefits of the 

proposed regulations, requests public 

comment on its considerations of costs 

and benefits, and considers the 

proposed regulations in light of the five 

factors outlined in Section 15(a).145

1. Background 

As discussed above, the Commission’s 

historical approach to position limits 

generally includes three components: 

(1) The level of the limits, which set a 

threshold that restricts the number of 

speculative positions that a person may 

hold in the spot-month, in any 

individual month, and in all months 

combined, (2) an exemption for 

positions that constitute bona fide 

hedging transactions, and (3) rules to 

determine which accounts and positions 

a person must aggregate for the purpose 

of determining compliance with the 

position limit levels. 

The proposed rules address the third 

component of the Commission’s 

position limits regime—aggregation— 

which is set out in regulation 150.4. 

This regulation generally requires that 


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146See note 18, supra. 

147See Proposed Rules, 77 FR at 31769, fn. 24. 

148The written comments are available on the 

Commission’s Web site at http://comments.cftc.gov/ 

PublicComments/CommentList.aspx?id=1208. 

149For additional background on part 150 and 

part 151 and the existing provisions for aggregation, 

see the Part 151 Aggregation Proposal. 

150CL–ABC, CL–AGA, CL–AIMA, CL–API, CL– 

Barclays, CL–CMC, CL–COPE, CL–EEI, CL–FIA, 

CL–Iberdrola, CL–ISDA/SIFMA, CL–MFA, CL– 

WGCEF. 

151CL–AGA, CL–MFA, CL–PEGCC, CL–WGCEF, 

CL–API, CL–Atmos, CL–CMC, CL–Chamber, CL– 

EEI. 

unless a particular exemption applies, a 

person must aggregate all positions for 

which that person: (1) Controls the 

trading decisions, or (2) has a 10 percent 

or greater ownership interest in an 

account or position; and in doing so the 

person must treat positions that are held 

by two or more persons pursuant to an 

express or implied agreement or 

understanding as if they were held by a 

single person. 

2. Part 151 Aggregation Proposal 

As noted above, the Commission 

received the aggregation petition on 

January 19, 2012.146 The aggregation 

petition requested interim relief under 

CEA section 4a(a)(7) from, among other 

things, part 151’s provision for 

aggregation of positions across accounts. 

The Commission also received letters 

that were generally supportive of the 

aggregation petition. In addition, several 

commenters opined on the aggregation 

rules in connection with the 

Commission’s request for comment on 

the spot-month position limits on cashsettled contracts established on an 

interim final basis in November 2011.147

As further discussed in the Part 151 

Aggregation Proposal, the aggregation 

petition and the interim final regulation 

commenters asserted that the 

Commission should clarify regulation 

151.7(i), which provides an exemption 

where the sharing of information would 

cause a violation of federal law, and 

expand the exemption to include 

circumstances in which the sharing of 

information would cause a violation of 

state or foreign law. In addition, the 

aggregation petition and commenters to 

the interim final regulation requested 

that the Commission create an 

aggregation exemption for owned nonfinancial entities. In this connection, 

some interim final regulation 

commenters argued that the 

Commission should only aggregate on 

the basis of control and not ownership. 

Finally, one interim final regulation 

commenter requested that the 

Commission expand the exemption 

provided in § 151.7(g) for the ownership 

interests of broker-dealers connected 

with specific market-making activity. 

As regards the violation-of-laws 

exemption in § 151.7(i), the Part 151 

Aggregation Proposal clarified that the 

exemption would apply where the 

sharing of information presents a 

‘‘reasonable risk’’ of violating the 

applicable law(s), retained the 

requirement to submit an opinion of 

counsel, and expanded the violation-oflaws exemption to include state law and 

the law of foreign jurisdictions. 

Proposed rule 151.7(b)(1) in the Part 

151 Aggregation Proposal provided that 

any person with an ownership or equity 

interest in an entity (financial or nonfinancial) of between 10 percent and 50 

percent (inclusive) may disaggregate the 

owned entity’s positions upon 

demonstrating compliance with each of 

several specified indicia of 

independence. The proposed indicia 

were that such person and the owned 

entity: (1) Do not have knowledge of the 

trading decisions of the other; (2) trade 

pursuant to separately developed and 

independent trading systems; (3) have 

in place policies and procedures to 

preclude sharing knowledge of, gaining 

access to, or receiving data about, trades 

of the other; (4) do not share employees 

that control the trading decisions of the 

other; and (5) maintain a risk 

management system that does not allow 

the sharing of trade information or 

trading strategies between entities. 

The Commission also proposed to 

expand the exemption for the 

underwriting of securities in regulation 

151.7(g) to include ownership interests 

acquired through the market-making 

activities of an affiliated broker dealer. 

The Part 151 Aggregation Proposal 

proposed to exempt from aggregation 

ownership interests acquired as part of 

a person’s reasonable market-making 

activity in the normal course of business 

as a broker-dealer registered with the 

SEC or comparable registration in a 

foreign jurisdiction, so long as there is 

no other ownership interests or indicia 

of control or concerted action. The 

Commission said in the Part 151 

Aggregation Proposal that this 

exemption would apply to ownership 

interests that are likely transitory and 

not for investment purposes. 

Proposed rule 151.7(j) in the Part 151 

Aggregation Proposal extended filing 

relief to ‘‘higher-tier’’ entities—i.e., 

entities with an ownership interest in 

the entity that is itself the owner of an 

entity and the subject of a filing for 

relief from aggregation. As such, the 

proposed rule allowed higher-tier 

entities to rely on exemption notices 

filed by owned entities. The Part 151 

Aggregation Proposal explained that 

such an exemption would reduce the 

burden of filing exemption notices by 

eliminating redundancies. 

The Commission also proposed in the 

Part 151 Aggregation Proposal to amend 

the IAC exemption in regulation 

151.7(f), which includes commodity 

pools exempt from registration under 

§ 4.13 that are structured as limited 

partnerships, to also encompass 

commodity pools structured as limited 

liability companies. 

As discussed below, the Commission 

received comments on the Part 151 

Aggregation Proposal.148 The 

amendments now being proposed to 

regulation 150.4 reflect the 

Commission’s consideration of the 

comments that were received on the 

Part 151 Aggregation Proposal. Thus, 

the discussion below covers the 

amendments in the Part 151 Aggregation 

Proposal and the comments on those 

proposed amendments.149 The 

Commission considers these comments, 

discusses the current proposed 

amendments to the aggregation 

provisions in § 150.4, considers the 

costs and benefits of the current 

proposal, and evaluates the current 

proposal in light of the five enumerated 

factors of Section 15(a)(2) of the CEA. 

3. Comments on the Part 151 

Aggregation Proposal 

The Commission received numerous 

comments regarding the proposed 

changes to the aggregation policy in 

§ 151.7. This section summarizes the 

issues raised in those comments 

relevant to the Commission’s 

considerations of costs and benefits; a 

more thorough discussion of comments 

relating to each provision of the Part 151 

Aggregation Proposal can be found in 

section II of this release. 

The proposed owned-entity 

exemption and its attendant indicia of 

independence was a topic in the 

majority of comments. Several 

commenters requested the Commission 

extend the owned entity exemption to a 

person with a greater than 50 percent 

ownership in the owned entity, so long 

as the person and the owned entity can 

both demonstrate independence.150

These commenters generally objected to 

the 50 percent ceiling on the grounds 

that ownership above 50 percent is 

potentially indicative of control but 

does not equate to control, and that 

ownership of an entity regardless of 

control over that entity is not an 

appropriate measure to determine 

aggregation.151 Some commenters 

asserted that the ‘‘bright-line test’’ of 50 


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152CL–AGA, CL–API, CL–COPE. 

153CL–FIA. 

154CL–WGCEF, CL–CMC, CL–COPE. 

155CL–Better Markets, Chris Barnard on June 21, 

2012 (‘‘CL–Barnard’’). 

156CL–IAMAW, CL–IATP. 

157CL–ISDA/SIFMA, CL–WGCEF, CL–PEGCC. 

158CL–AIMA, CL–API, CL–Atmos, CL–MFA. 

159CL–PEGCC. 

160CL–ABC. 

161CL–Barclays. 

162CL–API, CL–Chamber, CL–CMC. 

163CL–Barclays. 

164CL–COPE, CL–Iberdrola. 

165CL–Chamber. 

166CL–WGCEF. 

167CL–PEGCC. 

168CL–ABC. 

169CL–API, CL–Chamber, CL–PEGCC. 

170CL–CMC, CL–Chamber. 

171CL–WGCEF. 

172CL–IATP. 

173CL–EEI, CL–FIA. 

174CL–ISDA/SIFMA. 

175CL–IATP. 

176CL–API, CL–EEI, CL–FIA, CL–ISDA/SIFMA, 

CL–PEGCC, CL–WGCEF. 

177CL–Atmos. 

178CL–Better Markets, CL–IATP. 

179CL–ABC, CL–Barclays, CL–FIA. 

percent ownership is arbitrary.152

Another claimed that passive ownership 

poses little risk of coordinated trading 

and that requiring aggregation even 

when management and trading are 

independent inhibits legitimate 

commercial activity.153 Some 

commenters expressed concern that the 

aggregation standards may require 

information sharing and coordination 

between entities that had previously 

constructed barriers to preclude such 

activity, and that relaxing those barriers 

to comply with aggregation standards 

may create antitrust concerns.154

Conversely, other commenters 

expressed support for the Commission’s 

proposed 50 percent ceiling as 

reasonable and appropriate.155 Two 

commenters suggested that the 

Commission should not expand the 

exemption for owned entities.156

Commenters presented several 

alternatives to the 50 percent threshold. 

Some commenters suggested that 

ownership over 50 percent should 

create a ‘‘rebuttable presumption,’’ 

requiring entities to demonstrate why 

ownership above that threshold does 

not result in trading control or 

information sharing.157 Others 

supported disaggregation relief for an 

entity with greater than 50 percent 

ownership only in circumstances in 

which the Commission had specifically 

approved a request for relief.158 One 

commenter requested an exemption 

specifically for private equity 

investment funds that meet certain 

criteria.159 Another requested an 

exemption for pension plans to free 

them from aggregating a plan sponsor’s 

corporate positions with the plan’s 

positions given that pension plan 

managers are subject to fiduciary 

responsibilities to the plans they 

manage.160 In lieu of a new rule on 

owned entities, one commenter urged 

the Commission to rely on Form 40 

reports and raise the presumptive 

control standard to 50 percent instead of 

10 percent, thus never requiring 

aggregation below 50 percent 

ownership.161

Commenters also expressed concerns 

about the costs associated with the 

owned-entity exemption—in particular, 

the direct and indirect costs of the 50 

percent ‘‘ceiling’’ for disaggregation 

imposed by § 151.7(b)(1)(ii). Several 

noted that developing a system to 

coordinate trading among aggregated 

entities will be costly for market 

participants.162 One commenter said it 

would be costly to implement a system 

to monitor when ownership of an entity 

exceeds 10 percent.163

More specifically, two commenters 

said that the rules would require entities 

that are currently operated and managed 

separately, but who have common 

upstream ownership greater than 50 

percent, to implement information 

sharing systems solely to comply with 

the Commission’s position limits 

regime. These commenters noted that 

these systems would be costly to 

implement without providing a 

corresponding benefit because these 

entities are not currently operating in 

concert.164 Similarly, another 

commenter said that aggregation is 

impractical for commercial entities 

engaged in independent operations 

under common ownership and may put 

such entities at a competitive 

disadvantage.165 Another commenter 

noted that automatic aggregation at 50 

percent would require sophisticated 

information controls and expensive 

trade monitoring systems.166

Commenters also stated concerns 

about costs of complying with the 50 

percent ‘‘ceiling’’ for private funds and 

pension plans. One commenter noted 

that private funds would need entirely 

new (and costly) programs to monitor, 

allocate, and coordinate trading across 

portfolio companies though the fund 

company was not previously involved 

in trading.167 Another commenter had 

the same concern regarding the costs 

incurred by pension plans, which do 

not currently collect position or trading 

information from owned collective 

investment vehicles, to monitor 

positions in real-time across potentially 

hundreds of these vehicles.168

Commenters were also concerned that 

the automatic aggregation at 50 percent 

would lead to indirect costs by 

unnecessarily limiting hedging, because 

commonly owned companies will have 

to remain below position limits unless 

a bona fide hedging exemption is 

available.169 Commenters were also 

concerned about potential impacts on 

investment in other entities; one opined 

that the rules would discourage 

investment because owners would have 

to be more deeply involved in the 

operations of owned companies, 

including by overseeing trading.170 One 

commenter said that automatic 

aggregation at 50 percent would hinder 

management and could limit jointventure formation.171

Commenters also weighed in on the 

other aspects of the Commission’s 

proposed rules. Regarding the filing of 

exemptions, one commenter noted that 

the Commission’s estimated costs of 

aggregation filings appeared to be 

correct. This commenter also disputed 

the validity of the Working Group’s 

‘‘fear of vast new information 

infrastructure’’ and said that entities 

affected by the provisions will have the 

resources to apply for and receive the 

proposed exemptions from 

aggregation.172

Regarding the violation-of-laws 

exemption, several commenters 

generally expressed support for the 

‘‘reasonable risk’’ of violation 

standard,173 and the proposed 

exemption for federal, state, or foreign 

laws.174 One commenter expressed that 

the exemption should be limited to 

violations of federal law, and that 

exemption from aggregation for 

potential violations is impractical and 

should not be allowed.175 Further, some 

commenters opined that a memorandum 

of law, prepared by internal, as opposed 

to outside, counsel, should suffice, 

thereby mitigating outside legal fees.176

Another commenter noted it had no 

objection to the proposed opinion of 

counsel requirement,177 while others 

expressed support for the requirement 

as proposed, on grounds that 

aggregation relief should be available in 

only the most clear-cut cases.178

Some commenters asserted that 

aggregation should be applied on a prorata basis to avoid the double-counting 

of positions and a potential limit on 

trading that may affect liquidity.179 One 

commenter said that the aggregation 

requirements would cause pension 

plans to reconsider investing in 

collective investment vehicles. This 

commenter also maintained that the 

current federal position limits regime 

has had little effect on commodity pools 


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180CL–ABC. 

181CL–IATP. 

182CL–FIA. 

because position limits were imposed 

on only nine agricultural products.180

One commenter noted that the Part 

151 Aggregation Proposal to allow 

higher-tier entities to rely on filings by 

subsidiaries strikes an appropriate cost 

balance.181 Another commenter 

expressed support for the alternative of 

a single aggregate notice filing, that 

filing should be effective retroactively, 

and that sister affiliates of the filing 

entity should be able to rely on the 

filing.182

4. The Proposed Amendments to Part 

150 

a. Aggregation of Positions in Owned 

Entities 

The Commission is proposing two 

exemptions concerning the aggregation 

of positions in owned entities. First, as 

proposed in the Part 151 Aggregation 

Proposal, the Commission is proposing 

to allow a person to disaggregate the 

positions of an owned entity provided 

such person demonstrates compliance 

with the conditions of the exemption. 

Such conditions include ownership of 

less that 50 percent of the owned entity, 

independent trading systems, 

prohibition of the sharing of trading 

knowledge between the entities, and the 

other criteria found in proposed 

regulations 150.4(b)(2)(i)(A–E). Second, 

the Commission is proposing to allow 

persons with a greater than 50 percent 

ownership interest to apply for relief in 

accordance with proposed regulation 

150.4(b)(3), subject to the conditions of 

that section and the approval of the 

Commission or its delegate. 

As noted above and in the Part 151 

Aggregation Proposal, the Commission’s 

general policy on aggregation is derived 

from CEA Section 4a(a)(1), which 

directs the Commission to aggregate 

positions based on separate 

considerations of ownership, control, or 

persons acting pursuant to an express or 

implied agreement. The Commission’s 

historical approach to its statutory 

aggregation obligation has thus included 

both ownership and control factors in a 

manner designed to prevent evasion of 

prescribed position limits. The 

Commission continues to believe that 

ownership of an entity is an appropriate 

criterion for aggregation of that entity’s 

positions. 

Some commenters on the Part 151 

Aggregation Proposal opposed the 

requirement that a person own 50 

percent or less of another entity in order 

to obtain relief from the aggregation 

requirement, asserting that an 

ownership stake of greater than 50 

percent does not necessarily indicate 

control. However, as explained in part 

II.B.3. above, this requirement of 50 

percent or less ownership is in line with 

the language in CEA section 4a, the 

legislative history of that section, 

subsequent regulatory developments, 

and the Commission’s historical 

practices in this regard. Moreover, the 

ability for persons owning 50 percent or 

less of another entity (subject to 

establishing the indicia of 

independence) to disaggregate the 

positions of the owned entity would 

substantially liberalize the 

Commission’s approach to aggregation 

for position limits. The Commission 

does not consider this ceiling on 

disaggregation to be arbitrary; rather, 

ownership above 50 percent of an entity 

is a level at which there is a strong 

likelihood that a person would be able 

to use its ownership interest to directly 

or indirectly influence the owned 

entity’s accounts or positions. As noted 

above, 50 percent ownership is a 

standard used by other government 

agencies and reflects a general 

understanding that greater than 50 

percent ownership level poses 

substantial potential for direct or 

indirect control over an owned entity. 

Accordingly, the Commission views the 

50 percent ceiling to be a reasonable 

outer limit in most cases on the general 

availability of aggregation exemptions, 

even for passively-owned entities. 

However, the Commission recognizes 

that in certain specific circumstances it 

may be appropriate to allow exemptions 

from aggregation of an owned entity’s 

positions, even at greater than 50 

percent ownership. In particular, the 

Commission notes that while, in many 

instances, ownership of more than 50 

percent of an entity requires the owner 

to consolidate the financial statements 

of the owned entity, consolidation is not 

always required. Thus, as discussed in 

more detail in section II.B3.b of this 

release, the proposed amendments to 

part 150 include a provision for a 

person with more than 50 percent 

ownership of an owned entity, but that 

does not consolidate that entity in its 

financial statements, to apply to the 

Commission for aggregation relief on a 

case-by-case basis, provided the 

applicant can demonstrate adherence to 

stringent indicia of independence. 

Notwithstanding that it represents a 

relaxation from historical practice, the 

Commission believes that allowing caseby-case applications for disaggregation 

addresses commenters’ concerns 

without jeopardizing the effectiveness of 

the Commission’s position limits 

regime. 

The Commission expects no material 

negative effects on market quality as a 

result of the proposed relief from 

aggregation that would be available to 

persons that hold ownership interests in 

other entities. The Commission does not 

believe that a material reduction in 

hedging will result from the proposed 

requirement that, to obtain relief from 

aggregation based on notice only, a 

person must own 50 percent or less of 

an entity, because hedge exemptions 

would be available to any entity 

regardless of position aggregation. In 

addition, the proposed aggregation 

exemptions are more permissive than 

the 10 percent threshold currently 

applied. Impacts from the proposed 

regulations on investment activity 

where the investor desires a passive 

interest should also be minor, as these 

proposed regulations permit a passive 

investor to have a larger ownership 

interest and still claim an exemption 

from aggregation. As noted above, prior 

rules required aggregation at a 10 

percent ownership level, so these 

proposed regulations allowing for relief 

from aggregation at higher ownership 

levels should lower the overall impact 

of aggregation on market quality factors. 

The Commission requests comment 

on its proposed amendments to 

regulation 150.4. Are there other 

potential impacts on market quality 

factors that the Commission should 

consider? What costs and benefits may 

attend the proposed owned entity 

exemptions in proposed regulations 

150.4(b)(2) and 150.4(b)(3) that the 

Commission should consider? 

b. Consideration of Alternative 

Approaches to Aggregation of Positions 

in Owned Entities 

The Commission believes that the 

approach reflected in these proposed 

regulations—a bright-line ceiling on the 

availability of notice relief from 

aggregation at 50 percent ownership, 

with the potential for case-by-case relief 

in appropriate circumstances—is 

preferable to the various alternatives 

suggested by commenters for a variety of 

reasons. 

Several commenters to the Part 151 

Aggregation Proposal suggested that the 

aggregation requirements should be 

loosened further than was proposed by 

allowing persons with a more than 50 

percent ownership interest in another 

entity to obtain relief from aggregation 

by demonstrating independent trading 

by the two entities. While this approach 

would make relief from the aggregation 

requirements available to more entities 

in more different situations, the 


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183 77 FR 31767 at 31779. 

Commission believes, as noted above, 

that CEA Section 4a(a)(1) requires the 

aggregation of positions of an owned 

entity and that a 50 percent ownership 

interest is a reasonable indicator that a 

person is the owner of an entity and 

therefore aggregation should be 

required. The Commission notes that 

the proposed amendments to regulation 

150.4 would allow an entity with a more 

than 50 percent ownership interest in 

another entity to apply for relief from 

the aggregation requirement on a caseby-case basis if it meets the other 

conditions in regulation 150.4(b)(3). 

Through an exemption application, 

such entities may be able to rebut the 

presumption that greater than 50 

percent ownership results in trading 

control or information sharing; however, 

the Commission does not believe it is 

appropriate to grant such entities a 

broader exemption based only on a 

notice filing, because of the importance 

of the ownership standard in the statute 

as described above. The Commission 

has not proposed the commenters’ 

alternative because, while to loosen the 

standards as requested might lower 

immediate compliance burdens, the 

Commission believes it would also 

lessen the effectiveness of the position 

limits regime. 

Another commenter on the Part 151 

Aggregation Proposal urged that the 

Commission not require aggregation of 

positions and instead rely on 

information reported on Form 40. 

However, the Commission notes that not 

necessarily all subsidiaries file those 

reports, and in any case the Commission 

believes that effective and efficient 

compliance with position limit 

regulations, including compliance with 

aggregation requirements, is better 

served when it is primarily the 

responsibility of each market 

participant. The Commission believes 

that each entity can track its own 

compliance more efficiently compared 

to the Commission tracking the 

compliance of all the market 

participants involved; thus, the 

Commission does not endorse the 

shifting of the compliance burden from 

large traders to the Commission. For 

these reasons, the Commission believes 

that this proposed alternative does not 

have advantages that would justify its 

acceptance, and instead it could 

potentially impede compliance with the 

position limits regime. 

The Commission believes that 

aggregation on a pro-rata basis, as 

suggested by some commenters, would 

be administratively burdensome for 

both owners of financial interests and 

the Commission. For example, since the 

level of financial interest in a particular 

company may change over time, it 

would be burdensome to determine and 

monitor the appropriate pro rata 

allocation on a daily basis. Moreover, a 

pro rata approach would be inconsistent 

with the Commission’s historical 

requirement of aggregation of all the 

relevant positions of owned entities, 

absent an exemption. This is consistent 

with the view that a holder of a 

significant ownership interest in 

another entity may have the ability to 

influence all the trading decisions of 

that entity in which such ownership 

interest is held. For these reasons, the 

Commission declines to propose 

amending the policy in § 150.4 to 

require a pro-rata aggregation of 

positions. 

c. Other § 150.4 Exemptive Relief 

The Commission is proposing the 

violation-of-laws exemption largely as 

previously adopted in part 151 with the 

proposed changes in the Part 151 

Aggregation Proposal, with one 

amendment. The Commission has 

proposed the alternative posed by 

commenters to allow a memorandum of 

law, which can be prepared by internal 

counsel, to satisfy the requirement that 

the applicant explain the potential for a 

violation of law. This requirement is 

intended to provide the Commission 

with the ability to review the legal basis 

for the asserted regulatory impediment 

to the sharing of information, 

particularly where the asserted 

impediment arises from laws and/or 

regulations that the Commission does 

not directly administer; to consult with 

other federal regulators as to the 

accuracy of the opinion; and to 

coordinate the development of rules 

surrounding information sharing and 

aggregation across accounts in the 

future. The Commission believes that a 

memorandum of law prepared by 

internal counsel could provide the 

information and legal analysis to 

accomplish these goals, and a formal 

opinion of counsel is not required. 

Thus, the proposed amendments to part 

150 include the requirement suggested 

by commenters on the Part 151 

Aggregation Proposal. 

The Commission requests comment as 

to the costs and benefits of proposed 

rule 150.4(b)(8). In particular, the 

Commission requests comment as to the 

relative costs and benefits of requiring a 

written memorandum of law, rather 

than an opinion of counsel, regarding 

the reasonable risk of a violation of law. 

Regarding higher-tier entities, the 

Commission is proposing regulation 

150.4(b)(9), which is identical to 

previously proposed regulation 151.7(j). 

The exemption in proposed regulation 

150.4(b)(9) would allow higher-tier 

entities to rely on exemption notices 

filed by the owned entity, with respect 

to the accounts or positions specifically 

identified in the notice. In response to 

the suggestion of one Part 151 

Aggregation Proposal commenter that 

aggregate notice filings should be 

permitted, the Commission notes, as 

discussed above, that entities would be 

able to utilize the exemption in the 

manner most efficient for their 

enterprise. However, the Commission is 

not persuaded by the commenter’s 

assertion that the filing should be 

permitted to be effective retroactively, 

because retroactive application would 

result in administrative difficulty in 

monitoring the scope of exemptions 

from aggregation and negatively affect 

the Commission staff’s surveillance 

efforts. 

The Commission is also proposing 

exemptions for underwriting activity in 

proposed regulation 150.4(b)(6) and for 

broker dealer activity in proposed 

regulation 150.4(b)(7). The Commission 

believes that such activity may present 

less of a risk of coordinated trading 

because in both circumstances, the 

ownership interest is likely transitory 

and not held for investment purposes. 

Finally, consistent with the approach 

taken in 151.7(d), proposed rule 

150.4(d) will require aggregation of 

investments in accounts with 

substantially identical trading strategies. 

5. Costs and Benefits 

In the Part 151 Aggregation Proposal, 

the Commission stated its goal in 

proposing to amend the aggregation 

provisions of part 151: 

It is the Commission’s goal that this 

proposal uphold part 151’s regulatory aims 

without diminishing its effectiveness. In so 

doing, the Commission adheres to its belief 

that aggregation represents a key element to 

prevent evasion of prescribed position limits 

and that its historical approach towards 

aggregation—one that appropriately blends 

consideration of ownership and control 

indicia—remains sound.’’ 183

Similarly, in proposing these 

amendments to part 150, the 

Commission aims to achieve an 

appropriate balance between reducing 

costs for market participants and 

maintaining the effectiveness of part 

150’s regulatory objectives. The 

Commission believes that the 

regulations proposed herein would 

contribute to that goal by maintaining 

the Commission’s historical approach to 

aggregation while simultaneously 

updating that approach with thoughtful 

exemptions that relieve the burdens of 


emcdonald on DSK67QTVN1PROD with PROPOSALS2
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184 In regulation 151.7, the Commission added a 

requirement that accounts trading pursuant to 

identical trading strategies be aggregated. The 

Commission also provided exemptions for the 

underwriters of securities and for instances in 

which the sharing of information between persons 

would cause either person to violate federal law or 

regulations adopted thereunder. The Commission 

proposed in the Part 151 Aggregation Proposal to 

extend the violation-of-laws exemption to include 

state law and the laws of a foreign jurisdiction; to 

include an exemption for broker-dealers engaged in 

market-making activity; to allow higher-tier entities 

to file notices on behalf of lower-tier entities; to 

expand the applicability of the IAC exemption to 

include limited liability companies; and to provide 

a limited exemption for entities owning greater than 

10 but less than 50 percent of another entity. 

185The Commission notes that direct costs 

associated with how a particular entity aggregates 

its positions would be dependent upon that entity’s 

individual ownership structure, how and why the 

entity chooses to avail themselves of any particular 

exemption, and the methods employed by the entity 

to ensure compliance. Thus, as noted in the Part 

151 Aggregation Proposal, costs relating to this rule 

are highly entity-specific; actual costs may be 

higher or lower than the Commission can anticipate 

accurately. 

186The 10 percent threshold has been in place for 

the nine agricultural contracts with federal limits 

for decades, and for other contracts where limits 

were imposed by DCMs and enforced by the 

Commission. See supra, note 39 (citing to the 

statement of policy on aggregation issued in 1979, 

where the Commission codified its view, that, 

except in certain limited circumstances, a financial 

interest in an account at or above 10 percent ‘‘will 

constitute the trader as an account owner for 

aggregation purposes.’’ 44 FR 33839, 33843, June 

13, 1979). 

aggregation for those market 

participants who can demonstrate 

compliance with certain criteria and 

who choose to avail themselves of the 

exemptions—without undermining the 

effectiveness of the Commission’s 

position limits regime. 

In adopting the now-vacated part 151, 

the Commission noted that the 

amendments to regulation 151.7 largely 

tracked regulation 150.4 and therefore 

reflected continuity in the position 

limits regime. In this release, the 

Commission is proposing to provide the 

same exemptions that it had provided in 

regulation 151.7, along with the 

additional exemptions proposed in the 

Part 151 Aggregation Proposal, with 

some changes to reflect the views of 

commenters on that release.184

Using existing part 150 as the 

standard for comparison, the 

Commission will consider the 

incremental costs and benefits that arise 

from these proposed amendments. That 

is, if these proposed regulations are not 

adopted, the aggregation standards that 

would apply would be those described 

in regulation 150.4 as it currently exists. 

Although the Commission anticipates 

certain costs as a result of the proposed 

regulations—including a greater number 

of entities preparing and filing notices 

and memoranda of law, among other 

costs, since the availability of relief from 

aggregation has been expanded—the 

Commission believes that the 

regulations proposed herein, on a net 

basis, would cause market participants 

that use the exemptions in the 

regulations to incur a smaller burden as 

compared to the burden they would 

have incurred under regulation 150.4. 

a. Costs 

There are a myriad of ways a market 

participant could conceivably ensure 

proper compliance with the proposed 

amendments to regulation 150.4, 

depending on the particular 

circumstances of each market 

participant. In general, however, the 

Commission anticipates that entities 

who wish to take advantage of the 

exemptions in proposed regulation 

150.4 will incur direct costs associated 

with the following: (1) Developing a 

system for aggregating positions across 

owned entities; (2) initially determining 

which owned entities, other persons, or 

transactions qualify for any of the 

exemptions in regulation 150.4; (3) 

developing and maintaining some 

system of determining the scope of such 

exemptions over time; (4) potentially 

amending current operational structures 

to achieve eligibility for such 

exemptions; and (5) preparing and filing 

notices of exemption with the 

Commission, including memoranda of 

law if claiming the violation-of-laws 

exemption.185

To a large extent, market participants 

have incurred many of these costs to 

comply with existing regulation 150.4. 

For example, market participants that 

are affected by the existing aggregation 

requirement should already have a 

system in place for aggregating positions 

across owned entities. This rulemaking 

does not increase the costs of complying 

with the basic aggregation requirements 

of part 150, and in fact may decrease 

those costs by providing for relief from 

the aggregation requirements in certain 

situations. Because the Commission and 

DCMs generally have required 

aggregation of positions starting at a 10 

percent ownership threshold under the 

current regulatory requirements of part 

150 and the acceptable practice found in 

the prior version of part 38, the 

Commission expects that market 

participants active on DCMs have 

developed systems of aggregating 

positions across owned entities.186

Thus, the main direct costs associated 

with the proposed amendments to 

regulation 150.4, relative to the standard 

of existing regulation150.4, would be 

those incurred by entities as they 

determine whether they may be eligible 

for the proposed exemptions, and as 

they make subsequent filings required 

by the exemptions. For example, the 

Commission recognizes that there may 

be costs to market participants to adapt 

their systems in order to allow such 

systems to be used to determine 

whether persons qualify for the 

exemptions from the aggregation 

requirement proposed herein. Some 

entities may also incur direct costs to 

modify existing operational 

procedures—such as firewalls and 

reporting schemes—in order to be 

eligible to claim an exemption. 

The Commission does not believe that 

these proposed regulations would result 

in material indirect costs to market 

participants or the public. For market 

participants, these proposed regulations 

provide for relief in certain 

circumstances from the requirement to 

aggregate positions. For the public, the 

Commission believes that these 

proposed regulations appropriately 

balance the need for exemptions from 

aggregation in certain circumstances 

with the public interest in maintaining 

the effectiveness of the Commission’s 

position limits regime. 

The direct costs of the proposed 

regulations are impracticable to quantify 

in the aggregate because such costs are 

heavily dependent on the characteristics 

of each entity’s current systems, its 

corporate structure, its use of 

derivatives, the specific modifications it 

would implement in order to qualify for 

an exemption, and other circumstances. 

However, the Commission believes that 

market participants would choose to 

incur the costs of qualifying for and 

using the exemptions in the proposed 

regulations only if doing so is less costly 

than complying with the position limits. 

Thus, by providing these market 

participants with a lower cost 

alternative (i.e., qualifying for and using 

the exemptions) the proposed 

regulations may ease the overall 

compliance burden resulting from 

position limits, for it is reasonable to 

assume that no entity will elect the 

exemption if the benefits of doing so do 

not justify the costs. Accordingly, the 

Commission anticipates that 

notwithstanding the additional costs of 

determining eligibility and filing 

exemptions, the net result of the 

proposed rules for impacted market 

participants would be a reduction in 

costs as compared to the current 

standard in regulation 150.4. 

In the Part 151 Aggregation Proposal, 

the Commission requested ‘‘that 

commenters submit data from which the 

Commission can consider and quantify 

the costs of the proposed rules’’ because 

it recognized that ‘‘costs associated with 


emcdonald on DSK67QTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 221 / Friday, November 15, 2013 / Proposed Rules 68971 

187See Position Limits for Derivatives (November 

5, 2013). 

188See Section III.B of this release for a more 

detailed summary of the Commission’s PRA burden 

estimates. 

the aggregation of positions are highly 

variable and entity-specific.’’ No 

commenter on that rule provided data, 

leaving the Commission without 

additional data or another basis to 

quantify the incremental direct costs to 

determine eligibility and file for 

exemptions beyond those previously 

estimated by the Commission. 

One commenter asserted that the 

compliance with the rules would cost in 

excess of the $5.9 million estimate 

stated in the Part 151 Aggregation 

Proposal; however, the Commission 

notes that this comment relates to an 

estimate of costs relating to now-vacated 

regulation 151.7 and not the costs 

relating to the proposed rules in this 

release. Another commenter, without 

providing estimates, described a list of 

costs that could be incurred by each 

affected entity, including: (1) Evaluating 

its business structure and determine 

whether or not it qualifies for 

disaggregation relief; (2) planning for 

being compelled to aggregate should 

corporate structure change; (3) 

designing, testing, and implementing 

systems to aggregate positions across 

multiple entities across jurisdictions to 

ensure intraday compliance with 

position limits; and (4) incurring the ‘‘as 

yet unknown and ongoing cost of 

complying’’ with the proposed rules. 

The Commission again notes that 

entities who have been transacting in 

futures markets have been subject to 

these aggregation requirements for 

decades, and should have means of 

aggregating positions across multiple 

owned entities. 

Some of the costs mentioned above 

likely relate to the imposition of the 

Commission’s aggregation provision on 

swaps contracts as well as on the 

additional contract markets that would 

have been subject to federal position 

limits under the now-vacated part 151. 

Although part 151 is no longer in effect, 

the Commission has proposed, in 

accordance with the Dodd-Frank Act 

revisions to CEA section 4a, 

amendments to part 150 that would, 

among other things: expand the number 

of contract markets subject to federal 

position limits; impose speculative 

limits on swaps contracts; and require 

exchanges to conform their aggregation 

policies to the Commission’s 

aggregation policy in § 150.4.187 That 

proposed rulemaking thus may have 

significant implications for the 

Commission’s considerations of costs 

and benefits of the instant proposal. 

Should that rule be adopted as 

proposed, the aggregation policies 

proposed herein would apply on a 

federal level to commodity derivative 

contracts, including swaps, based on an 

additional 19 commodities. This 

expansion may create additional 

compliance costs for futures market 

participants, who would have to expand 

current procedures for aggregating 

futures positions in order to include 

swaps positions, as well as for swaps 

market participants, who would be 

required to develop a system to comply 

with aggregation policies or expand 

already existing policies and procedures 

to incorporate the aggregation rules. 

Further, should the other proposed 

rulemaking be adopted as proposed, 

exchanges would be required to 

conform their aggregation policies to the 

Commission’s aggregation policy. As 

such, all contracts with speculative 

position limits, including exempt 

commodity contracts, would utilize the 

Commission’s aggregation policy, 

including the amendments to that 

policy proposed in this rulemaking. 

Until and unless that proposal is 

finalized by the Commission, part 150 

applies to only the nine contracts 

enumerated in current § 150.2; in that 

case, the Commission believes that 

many of the costs described by 

commenters would be substantially less 

than previously estimated. The 

Commission requests that commenters 

submit data from which the 

Commission can quantify the costs of 

the proposed rules amending § 150.4. 

The Commission also requests that 

commenters provide data that would 

help the Commission to compare the 

potential cost implications of the instant 

proposal in the event that the other 

amendments to part 150 are adopted to 

the potential cost implications in the 

event that they are not. 

The Commission understands that the 

additional exemptions proposed herein 

may create additional costs to file the 

proper exemptive notices in accordance 

with regulations 150.4(c) and 150.4(d). 

However, the exemptions are elective, 

so no entity is required to make this 

filing if that entity determines the costs 

of doing so do not justify the potential 

benefit resulting from the exemption. 

Thus, the Commission does not 

anticipate the costs of obtaining any of 

the exemptions to be overly 

burdensome. Nor does the Commission 

anticipate the costs would be so great as 

to discourage entities from utilizing 

available exemptions, as applicable. 

In accordance with the Paperwork 

Reduction Act (PRA) the Commission 

has estimated the costs of the paperwork 

required to claim the proposed 

exemptions. As stated in the PRA 

section of this release, the Commission 

estimates that 240 entities will submit a 

total of 340 responses per year and incur 

a total burden of 7,100 labor hours at a 

cost of approximately $852,000 

annually in order to claim exemptive 

relief under regulation 150.4.188 This 

burden includes a recounting of the 

estimates included in the final 

regulations promulgating now vacated 

part 151, as those exemptions are being 

re-proposed in part 150; however, the 

estimates have been reduced from that 

rulemaking because of the relatively 

smaller sphere of impact for part 150 as 

compared to part 151. That is, as part 

151 extended federal position limits to 

swap contracts, the impact of that rule 

was broader than the impact anticipated 

for the proposed regulations herein. 

Should the proposed amendments to 

other sections of part 150 be adopted, 

the Commission anticipates the PRA 

burden would increase accordingly. 

The Commission requests comment 

on its consideration of the costs 

imposed by the proposed regulations. 

Are there other direct or indirect costs 

that the Commissions should consider? 

Has the Commission accurately 

characterized the nature of the costs to 

be incurred? Commenters are 

specifically encouraged to submit both 

qualitative and quantitative estimates of 

the potential costs associated with the 

proposed changes to § 150.4, as well as 

data or other information to support 

such estimates. 

b. Benefits 

As discussed above, the Commission’s 

goal in proposing amendments to its 

aggregation policy in regulation 151.7 

was to reduce costs for market 

participants without jeopardizing the 

effectiveness of its aggregation policy 

and by extension its position limits 

regime. Similarly, the Commission 

believes that the proposed amendments 

to regulation 150.4 would help to realize 

that goal, essentially benefiting both 

market participants (through lower 

costs) and the market at large (through 

an effective position limits regime). 

The Commission continues to view 

aggregation as an essential part of its 

position limits regime. The proposed 

regulations include exemptions from the 

aggregation policy, the purpose of 

which is to prevent evasion of position 

limits through coordinated trading. The 

Commission believes that because the 

proposed exemptions would require 

demonstration of eligibility and 

qualification for an entity to take 

advantage of them, only those entities 


emcdonald on DSK67QTVN1PROD with PROPOSALS2
68972 Federal Register / Vol. 78, No. 221 / Friday, November 15, 2013 / Proposed Rules 

189 76 FR 71626 at 71675. 

whose activities impose a lesser risk of 

coordinated trading would be exempted 

from the aggregation requirements. In 

this way, the Commission believes that 

the exemptions that would be available 

through these proposed regulations 

would not inhibit the effectiveness of 

the Commission’s aggregation policy in 

particular or position limits regime in 

general. 

However, for those entities who 

represent a lesser risk of coordinated 

trading—as demonstrated by their 

eligibility to obtain an applicable 

exemption—the proposed rule 

represents a benefit in the form of lower 

costs of complying with the 

Commission’s position limits regime 

while preserving the important 

protections of the existing aggregation 

policy. Based on the comments received 

on the part 151 Aggregation Proposal, 

the Commission has attempted where 

possible to minimize the regulatory 

burden of applying for the exemption— 

for example, allowing a memorandum of 

law prepared by internal counsel 

instead of a formal opinion—to increase 

the net benefits available to market 

participants. The Commission also 

proposed an avenue for certain entities 

to apply for relief on a case-by-case 

basis, providing additional flexibility for 

market participants. 

The Commission requests comment 

on its considerations of the benefits of 

the proposed rules. Are there other 

benefits to markets, market participants, 

and/or the public that the Commission 

should consider? Commenters are 

specifically encouraged to include both 

quantitative and qualitative assessments 

of the potential benefits of the proposed 

regulations in § 150.4, as well as data or 

other information to support such 

assessments. 

6. Section 15(a) Considerations 

As the Commission has long held, 

position limits are an important 

regulatory tool that is designed to 

prevent concentrated positions of 

sufficient size to manipulate or disrupt 

markets. The aggregation of accounts for 

purposes of applying position limits 

represents an integral component that 

impacts the effectiveness of those limits. 

The rules proposed herein would 

amend the Commission’s longstanding 

aggregation policy to introduce certain 

exemptions. The Commission believes 

these proposed regulations would 

preserve the important protections of 

the existing aggregation policy, but at a 

lower cost for market participants. 

a. Protection of Market Participants and 

the Public 

The Commission believes these 

proposed rules would not materially 

affect the level of protection of market 

participants and the public provided by 

the aggregation policy reflected 

currently in regulation 150.4. Given that 

the account aggregation standards are 

necessary to implement an effective 

position limit regime, it is important 

that the exemptions proposed herein be 

sufficiently tailored to exempt from 

aggregation only those accounts that 

pose a low risk of coordinated trading. 

The owned-entity exemption would 

maintain the Commission’s historical 

presumption threshold of 10 percent 

ownership or equity interest and make 

that presumption rebuttable only where 

several conditions indicative of 

independence are met. This proposed 

exemption focuses on the conditions 

that impact trading independence. In 

addition, by providing an avenue to 

apply for relief when ownership is 

greater than 50 percent of the owned 

entity, the proposed rules would allow 

market participants greater flexibility in 

meeting the requirements of the position 

limits regulations, provided they are 

eligible to apply. The Commission 

believes that these proposed exemptions 

would allow the Commission to direct 

its resources to monitoring those entities 

that pose a higher risk of coordinated 

trading and thus a higher risk of 

circumventing position limits, without 

reducing the protection of market 

participants and the public that the 

Commission’s aggregation policy 

affords. 

The Commission believes the 

proposed exemptions would reduce 

costs for market participants without 

compromising the integrity or 

effectiveness of the Commission’s 

aggregation policy. 

b. Efficiency, Competition, and 

Financial Integrity of Markets 

As discussed above, the Commission 

does not believe that the proposed 

regulations would negatively impact 

market quality indicators, such as 

liquidity or incentive for investment, to 

the detriment of the efficiency, 

competitiveness, or integrity of 

derivatives markets. Rather, the 

Commission believes that these 

proposed regulations would balance 

appropriately the need to preserve 

account aggregation as a tool to uphold 

the integrity of the part 151 position 

limit regime, while also providing for 

relief from the aggregation requirements 

where they are not necessary to prevent 

coordinated speculative trading. The 

Commission expects the proposed rules 

to further the Commission’s mission to 

deter and prevent manipulative 

behavior while maintaining sufficient 

liquidity for hedging activity and 

protecting the price discovery process. 

Prior rules required aggregation at a 10 

percent ownership level, so these 

regulations, which propose relief from 

aggregation at higher ownership levels, 

should lower the overall impact of 

aggregation on market quality factors 

without imposing unnecessary or 

inappropriate restrictions on trading. 

c. Price Discovery 

Similarly, because the Commission 

has structured the exemptions in these 

proposed regulations to maintain the 

effectiveness of the position limits 

regime in part 150, the Commission 

believes that these rules would not 

impact the price discovery process, 

which the position limit regime 

(including the account aggregation 

provisions in regulation 150.4) is 

designed to protect. Because the 

exemptions in and of themselves do not 

directly impact the formation of 

prices—only the aggregation of 

positions—the rules would not impact 

the price discovery process. 

d. Risk Management 

The Commission has stated 

previously that the imposition of 

position limits requires market 

participants to ensure they do not amass 

positions of sufficient size to disrupt the 

orderly flow of the market or to 

influence unduly the formation of 

prices. In so doing, market participants 

protect themselves—and the market as a 

whole—from the disruption that such 

large positions could cause, when 

traded improperly.189 The proposed 

rules would allow entities to not 

aggregate positions in circumstances 

where the Commission has determined 

that the positions are at a lesser risk of 

disrupting the market through the 

coordinated trading of affiliated entities. 

Thus, the Commission believes these 

rules, if adopted, would not lessen the 

effectiveness of the sound risk 

management practices that the position 

limits regime promotes. The 

Commission does not expect the 

proposed regulations to materially 

inhibit the use of derivatives for 

hedging, because hedge exemptions are 

available to any entity regardless of 

position aggregation and the proposed 

regulations would be more permissive 

than the 10 percent threshold for 


emcdonald on DSK67QTVN1PROD with PROPOSALS2
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190 44 U.S.C. 601 et seq. 

191 5 U.S.C. 601(2), 603–05. 

192See Policy Statement and Establishment of 

Definitions of ‘‘Small Entities’’ for Purposes of the 

Regulatory Flexibility Act, 47 FR 18618, 18619, 

Apr. 30, 1982 (DCMs, FCMs, and large traders) 

(‘‘RFA Small Entities Definitions’’); Opting Out of 

Segregation, 66 FR 20740, 20743, Apr. 25, 2001 

(eligible contract participants); Position Limits for 

Futures and Swaps; Final Rule and Interim Final 

Rule, 76 FR 71626, 71680, Nov. 18, 2011 (clearing 

members); Core Principles and Other Requirements 

for Swap Execution Facilities, 78 FR 33476, 33548, 

June 4, 2013 (SEFs); A New Regulatory Framework 

for Clearing Organizations, 66 FR 45604, 45609, 

Aug. 29, 2001 (DCOs); Registration of Swap Dealers 

and Major Swap Participants, 77 FR 2613, Jan. 19, 

2012, (swap dealers and major swap participants); 

and Special Calls, 72 FR 50209, Aug. 31, 2007 

(foreign brokers). 

193See 77 FR 31780. 

194See Position Limits for Derivatives (November 

5, 2013). 

aggregation that applied in existing 

regulation 150.4. 

e. Other Public Interest Considerations 

The Commission has not identified 

any other public interest considerations 

related to the costs and benefits of the 

rules. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) requires that agencies consider 

whether the rules they propose will 

have a significant economic impact on 

a substantial number of small entities 

and, if so, provide a regulatory 

flexibility analysis respecting the 

impact.190 A regulatory flexibility 

analysis or certification typically is 

required for ‘‘any rule for which the 

agency publishes a general notice of 

proposed rulemaking pursuant to’’ the 

notice-and-comment provisions of the 

Administrative Procedure Act, 5 U.S.C. 

553(b).191 The requirements related to 

the proposed amendments fall mainly 

on registered entities, exchanges, FCMs, 

swap dealers, clearing members, foreign 

brokers, and large traders. The 

Commission has previously determined 

that registered DCMs, FCMs, swap 

dealers, major swap participants, 

eligible contract participants, SEFs, 

clearing members, foreign brokers and 

large traders are not small entities for 

purposes of the RFA.192 While the 

requirements under the proposed 

rulemaking may impact non-financial 

end users, the Commission notes that 

position limits levels apply only to large 

traders. Accordingly, the Chairman, on 

behalf of the Commission, hereby 

certifies, on behalf of the Commission, 

pursuant to 5 U.S.C. 605(b), that the 

actions proposed to be taken herein 

would not have a significant economic 

impact on a substantial number of small 

entities. The Chairman made the same 

certification in the Proposal,193 and the 

Commission did not receive any 

comments on the RFA in relation to the 

proposed rulemaking. 

C. Paperwork Reduction Act 

1. Overview 

The Paperwork Reduction Act 

(‘‘PRA’’) imposes certain requirements 

on Federal agencies in connection with 

their conducting or sponsoring any 

collection of information as defined by 

the PRA. An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

control number issued by the Office of 

Management and Budget (‘‘OMB’’). 

Certain provisions of the proposed 

regulations would result in amendments 

to a previously-approved collection of 

information requirements within the 

meaning of the PRA. Therefore, the 

Commission is submitting to OMB for 

review in accordance with 44 U.S.C. 

3507(d) and 5 CFR 1320.11 the 

information collection requirements 

proposed in this rulemaking proposal as 

an amendment to the previouslyapproved collection associated with 

OMB control number 3038–0013. 

If adopted, responses to this 

collection of information would be 

mandatory. The Commission will 

protect proprietary information 

according to the Freedom of Information 

Act and 17 CFR part 145, headed 

‘‘Commission Records and 

Information.’’ In addition, the 

Commission emphasizes that section 

8(a)(1) of the Act strictly prohibits the 

Commission, unless specifically 

authorized by the Act, from making 

public ‘‘data and information that 

would separately disclose the business 

transactions or market positions of any 

person and trade secrets or names of 

customers.’’ The Commission also is 

required to protect certain information 

contained in a government system of 

records pursuant to the Privacy Act of 

1974. In January of 2012, the 

Commission received a petition 

requesting relief under section 4a(a)(7) 

of the CEA and clarification of certain 

aggregation requirements in regulation 

151.7. 

On May 30, 2012, the Commission 

published in the Federal Register a 

notice of proposed modifications to part 

151 of the Commission’s regulations. 

The modifications addressed the policy 

for aggregation under the Commission’s 

position limits regime for 28 exempt 

and agricultural commodity futures and 

options contracts and the physical 

commodity swaps that are economically 

equivalent to such contracts. In an 

Order dated September 28, 2012, the 

District Court for the District of 

Columbia vacated part 151 of the 

Commission’s regulations. The 

Commission is now proposing 

modifications to the aggregation 

provisions of part 150 of the 

Commission’s regulations that are 

substantially similar to the aggregation 

modifications proposed to part 151, 

except that the modifications address 

the policy for aggregation under the 

Commission’s position limits regime for 

futures and option contracts on nine 

agricultural commodities set forth in 

part 150. 

The Commission is also proposing to 

amend other sections of part 150 in a 

separate rulemaking that would, among 

other things: Expand the number of 

contract markets subject to federal 

position limits; impose speculative 

limits on swaps contracts; and require 

exchanges to conform their aggregation 

policies to the Commission’s 

aggregation policy in part 150.4.194

Given the increase in scope proposed in 

the other rulemaking, the Commission 

anticipates a corresponding increase in 

the PRA burdens arising from this 

proposal should the amendments to 

other sections of part 150 be adopted. 

Unless and until that rulemaking is 

finalized, however, the instant proposal 

applies only to the nine commodities 

enumerated in current § 150.2. The 

Commission requests comment 

regarding the impact on its PRA analysis 

should the amendments to part 150 

proposed in the separate rulemaking be 

adopted. 

Specifically, regulation 150.4(b)(2) 

proposes an exemption for a person to 

disaggregate the positions of a 

separately organized entity (‘‘owned 

entity’’). To claim the exemption, a 

person would need to meet certain 

criteria and file a notice with the 

Commission in accordance with 

regulation 150.4(c). The notice filing 

would need to demonstrate compliance 

with certain conditions set forth in 

regulations 150.4(b)(2)(i)(A)–(E). Similar 

to other exemptions from aggregation, 

the notice filing would be effective upon 

submission to the Commission, but the 

Commission may call for additional 

information as well as reject, modify or 

otherwise condition such relief. Further, 

such person is obligated to amend the 

notice filing in the event of a material 

change to the filing. 

The proposed rules also contain 

proposed regulation 150.4(b)(3) which 

establishes a similar but separate 

owned-entity exemption with more 

intensive qualifications for exemption. 

To claim the exemption, a person would 


emcdonald on DSK67QTVN1PROD with PROPOSALS2
68974 Federal Register / Vol. 78, No. 221 / Friday, November 15, 2013 / Proposed Rules 

195The Bureau of Labor Statistics reports that an 

average of 32.8% of all compensation in the 

financial services industry is related to benefits. 

This figure may be obtained on the Bureau of Labor 

Statistics Web site, at http://www.bls.gov/

news.release/ecec.t06.htm. The Commission 

rounded this number to 33% to use in its 

calculations. 

196Other estimates of this figure have varied 

dramatically depending on the categorization of the 

expense and the type of industry classification used 

(see, e.g., BizStats at http://www.bizstats.com/

corporation-industry-financials/finance-insurance52/securities-commodity-contracts-other-financialinvestments-523/commodity-contracts-dealing-andbrokerage-523135/show and Damodaran Online at 

http://pages.stern.nyu.edu/∼adamodar/pc/datasets/

uValuedata.xls. The Commission has chosen to use 

a figure of 50% for overhead and administrative 

expenses to attempt to conservatively estimate the 

average for the industry. 

need to meet certain criteria above and 

beyond that imposed by regulation 

150.4(b)(2) and file an application for 

exemption with the Commission in 

accordance with regulation 150.4(c). 

The notice filing would need to 

demonstrate compliance with certain 

conditions as well as additional 

information that could inform the 

Commission’s decision to grant or not to 

grant the person’s application. Similar 

to other exemptions from aggregation, 

the notice filing would be effective upon 

submission to the Commission, but the 

Commission may call for additional 

information as well as reject, modify or 

otherwise condition such relief. Further, 

such person is obligated to amend the 

notice filing in the event of a material 

change to the filing. 

The Commission is also proposing to 

amend the definitions of eligible entity 

and independent account controller in 

part 150.1 and 150.4(5) to specifically 

provide for regulation 4.13 commodity 

pools established as limited liability 

companies. In addition, the Commission 

is proposing to amend the definition of 

independent account controller to 

specifically provide for commodity pool 

operators that operate excluded pools as 

defined under regulation 4.5(a)(4) of the 

Commission’s regulations. These 

amendments would likely expand the 

number of entities that can file for the 

independent account controller 

aggregation exemption. 

The proposal includes two provisions 

in proposed regulations 150.4(b)(6) and 

150.4(b)(7) providing exemptions from 

aggregation for underwriting agents and 

broker-dealers engaging in market 

making activity, respectively. Both 

exemptions are self-executing and do 

not require a notice filing. 

The proposal also includes proposed 

regulation 150.4(b)(8) which provides 

an exemption from aggregation where 

the sharing of information between 

persons would cause either person to 

violate federal law. The exemption 

would apply to a situation where the 

sharing of information creates a 

reasonable risk of a violation of federal, 

state, or foreign law or regulations 

adopted thereunder. The rules also 

propose a requirement that market 

participants file a notice demonstrating 

compliance with the condition, 

including an internal memorandum of 

counsel. The memorandum allows 

Commission staff to review the legal 

basis for the asserted regulatory 

impediment to the sharing of 

information, and is particularly helpful 

where the asserted impediment arises 

from laws and/or regulations that the 

Commission does not directly 

administer. Further, Commission staff 

will have the ability to consult with 

other federal regulators as to the 

accuracy of the opinion, and to 

coordinate the development of rules 

surrounding information sharing and 

aggregation across accounts in the 

future. 

Finally, the proposed rules propose 

relief from notice filings for ‘‘highertier’’ entities, which, under proposed 

regulation 150.4(b)(9), may rely on the 

filings submitted by owned entities. A 

‘‘higher-tier’’ entity need not submit a 

separate notice pursuant to the notice 

filing requirements to rely upon the 

notice filed by an owned entity as long 

as it complies with conditions of the 

applicable aggregation exemption. 

2. Methodology and Assumptions 

It is not possible at this time to 

precisely determine the number of 

respondents affected by the proposed 

rules. Many of the regulations that 

impose PRA burdens are exemptions 

that a market participant may elect to 

take advantage of, meaning that without 

intimate knowledge of the day-to-day 

business decisions of all its market 

participants, the Commission could not 

know which participants, or how many, 

may elect to obtain such an exemption. 

Further, the Commission is unsure of 

how many participants not currently in 

the market may be required to or may 

elect to incur the estimated burdens in 

the future. 

These limitations notwithstanding, 

the Commission has made best-effort 

estimations regarding the likely number 

of affected entities for the purposes of 

calculating burdens under the PRA. The 

Commission used its proprietary data, 

collected from market participants, to 

estimate the number of respondents for 

each of the proposed obligations subject 

to the PRA by estimating the number of 

respondents who may be close to a 

position limit and thus may file for 

relief from aggregation requirements. 

The Commission’s estimates 

concerning wage rates are based on 2011 

salary information for the securities 

industry compiled by the Securities 

Industry and Financial Markets 

Association (‘‘SIFMA’’). The 

Commission is using a figure of $120 

per hour, which is derived from a 

weighted average of salaries across 

different professions from the SIFMA 

Report on Management & Professional 

Earnings in the Securities Industry 

2011, modified to account for an 1800- 

hour work-year, adjusted to account for 

the average rate of inflation in 2012. 

This figure was then multiplied by 1.33 

to account for benefits 195 and further by 

1.5 to account for overhead and 

administrative expenses.196 The 

Commission anticipates that compliance 

with the provisions would require the 

work of an information technology 

professional; a compliance manager; an 

accounting professional; and an 

associate general counsel. Thus, the 

wage rate is a weighted national average 

of salary for professionals with the 

following titles (and their relative 

weight); ‘‘programmer (average of senior 

and non-senior)’’ (15% weight), ‘‘senior 

accountant’’ (15%) ‘‘compliance 

manager’’ (30%), and ‘‘assistant/

associate general counsel’’ (40%). All 

monetary estimates have been rounded 

to the nearest hundred dollars. 

The Commission welcomes comment 

on its assumptions and estimates. 

3. Reporting Burdens 

Proposed regulation 150.4(b)(2) would 

require qualified persons to file a notice 

in order to claim exemptive relief from 

aggregation. Further, proposed 

regulation 150.4(b)(2)(ii) states that the 

notice is to be filed in accordance with 

proposed regulation 150.4(c), which 

requires a description of the relevant 

circumstances that warrant 

disaggregation and a statement that 

certifies that the conditions set forth in 

the exemptive provision have been met. 

Regulation 150.4(b)(3) specifies that 

qualified persons may request an 

exemption from aggregation in 

accordance with proposed regulation 

150.4(c). Such a request would be 

required to include a description of the 

relevant circumstances that warrant 

disaggregation and a statement 

certifying the conditions have been met. 

Persons claiming these exemptions 

would be required to submit to the 

Commission, as requested, such 

information as relates to the claim for 

exemption. An updated or amended 

notice must be filed with the 

Commission upon any material change. 


emcdonald on DSK67QTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 221 / Friday, November 15, 2013 / Proposed Rules 68975 

197See above, text accompanying note 196. 

198See Position Limits for Derivatives (November 

5, 2013). 

The release also proposes to extend 

relief available under 150.4(b)(5) to 

additional entities; the Commission 

expects that, as a result of the expanded 

exemptive relief available to these 

entities, a greater number of persons 

will file exemptive notices under 

150.4(b)(5). The Commission also 

expects entities to file for relief under 

proposed regulation 150.4(b)(8), which 

allows for entities to file a notice, 

including a memorandum of law, in 

order to claim the exemption. 

Given the expansion of the 

exemptions that market participants 

may claim, the Commission anticipates 

an increase in the number of notice 

filings. However, because of the relief 

for ‘‘higher-tier’’ entities under 

regulation 150.4(b)(9) the Commission 

expects that increase to be offset 

partially by a reduction in the number 

of filings by ‘‘higher-tier’’ entities. Thus, 

the Commission anticipates a net 

increase in the number of filings under 

regulation 150.4 as a result of the 

adoption of these proposed rules. The 

Commission believes that this increase 

will create an increase in the annual 

labor burden. However, because entities 

have already incurred the capital, startup, operating, and maintenance costs to 

file other exemptive notices—such as 

those currently allowed for independent 

account controllers and futures 

commission merchants under regulation 

150.4—the Commission does not 

anticipate an increase in those costs. 

The Commission estimates that 100 

entities will each file two notices 

annually under proposed regulation 

150.4(b)(2), at an average of 20 hours per 

filing. Thus, the Commission 

approximates a total per entity burden 

of 40 labor hours annually. At an 

estimated labor cost of $120, the 

Commission estimates a cost of 

approximately $4,800 per entity for 

filings under proposed regulation 

150.4(b)(2). 

The Commission estimates that 25 

entities will each file one notice 

annually under proposed regulation 

150.4(b)(3), at an average of 30 hours per 

filing. Thus, the Commission 

approximates a total per entity burden 

of 30 labor hours annually. At an 

estimated labor cost of $120, the 

Commission estimates a cost of 

approximately $3,600 per entity for 

filings under proposed regulation 

150.4(b)(3). 

The Commission estimates that 75 

entities will each file one notice 

annually under proposed regulation 

150.4(b)(5), at an average of 10 hours per 

filing. Thus, the Commission 

approximates a total per entity burden 

of 10 labor hours annually. At an 

estimated labor cost of $120, the 

Commission estimates a cost of 

approximately $1,200 per entity for 

filings under proposed regulation 

150.4(b)(5). 

The Commission estimates that 40 

entities will each file one notice 

annually under proposed regulation 

150.4(b)(8), including the requisite 

memorandum of law, at an average of 40 

hours per filing. Thus, the Commission 

approximates a total per entity burden 

of 40 labor hours annually. At an 

estimated labor cost of $120,197 the 

Commission estimates a cost of 

approximately $4,800 per entity for 

filings under proposed regulation 

150.4(b)(8). 

In sum, the Commission estimates 

that 240 entities will submit a total of 

340 responses per year and incur a total 

burden of 7,100 labor hours at a cost of 

approximately $852,000 annually in 

order to claim exemptive relief under 

regulation 150.4. 

4. Comments on Information Collection 

The Commission invites the public 

and other federal agencies to comment 

on any aspect of the reporting and 

recordkeeping burdens discussed above. 

Pursuant to 44 U.S.C. 3506(c)(2)(B), the 

Commission solicits comments in order 

to: (1) Evaluate whether the proposed 

collections of information are necessary 

for the proper performance of the 

functions of the Commission, including 

whether the information will have 

practical utility; (2) evaluate the 

accuracy of the Commission’s estimate 

of the burden of the proposed 

collections of information; (3) determine 

whether there are ways to enhance the 

quality, utility, and clarity of the 

information to be collected; and (4) 

minimize the burden of the collections 

of information on those who are to 

respond, including through the use of 

automated collection techniques or 

other forms of information technology. 

Comments may be submitted directly 

to the Office of Information and 

Regulatory Affairs, by fax at (202) 395– 

6566 or by email at OIRA-submissions@

omb.eop.gov. Please provide the 

Commission with a copy of comments 

submitted so that all comments can be 

summarized and addressed in the final 

regulation preamble. Refer to the 

Addresses section of this notice for 

comment submission instructions to the 

Commission. A copy of the supporting 

statements for the collection of 

information discussed above may be 

obtained by visiting RegInfo.gov. OMB 

is required to make a decision 

concerning the collection of information 

between 30 and 60 days after 

publication of this release. 

Consequently, a comment to OMB is 

most assured of being fully considered 

if received by OMB (and the 

Commission) within 30 days after the 

publication of this notice of proposed 

rulemaking. 

As noted above, the following 

proposed amendments to part 150 may 

require conforming technical changes if 

the Commission also adopts any 

proposed amendments to its regulations 

regarding position limits.198

List of Subjects in 17 CFR Part 150 

Position limits, Bona fide hedging, 

Referenced contracts. 

For the reasons discussed in the 

preamble, the Commission proposes to 

amend 17 CFR part 150 as follows: 

PART 150—LIMITS ON POSITIONS 

■ 1. The authority citation for part 150 

is revised to read as follows: 

Authority: 7 U.S.C. 6a, 6c, and 12a(5), as 

amended by Title VII of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, 

Pub. L. 111–203, 124 Stat. 1376 (2010). 

■ 2. Amend § 150.1 to revise paragraphs 

(d), (e)(2), and (e)(5) to read as follows: 

§ 150.1 Definitions. 

* * * * * 

(d) Eligible entity means a commodity 

pool operator; the operator of a trading 

vehicle which is excluded, or which 

itself has qualified for exclusion from 

the definition of the term ‘‘pool’’ or 

‘‘commodity pool operator,’’ 

respectively, under § 4.5 of this chapter; 

the limited partner, limited member or 

shareholder in a commodity pool the 

operator of which is exempt from 

registration under § 4.13 of this chapter; 

a commodity trading advisor; a bank or 

trust company; a savings association; an 

insurance company; or the separately 

organized affiliates of any of the above 

entities: 

(1) Which authorizes an independent 

account controller independently to 

control all trading decisions with 

respect to the eligible entity’s client 

positions and accounts that the 

independent account controller holds 

directly or indirectly, or on the eligible 

entity’s behalf, but without the eligible 

entity’s day-to-day direction; and 

(2) Which maintains: 

(i) Only such minimum control over 

the independent account controller as is 

consistent with its fiduciary 

responsibilities to the managed 

positions and accounts, and necessary 


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to fulfill its duty to supervise diligently 

the trading done on its behalf; or 

(ii) If a limited partner, limited 

member or shareholder of a commodity 

pool the operator of which is exempt 

from registration under § 4.13 of this 

chapter, only such limited control as is 

consistent with its status. 

(e) * * * 

(2) Over whose trading the eligible 

entity maintains only such minimum 

control as is consistent with its 

fiduciary responsibilities to the 

managed positions and accounts to 

fulfill its duty to supervise diligently the 

trading done on its behalf or as 

consistent with such other legal rights 

or obligations which may be incumbent 

upon the eligible entity to fulfill; 

* * * * * 

(5) Who is: 

(i) Registered as a futures commission 

merchant, an introducing broker, a 

commodity trading advisor, or an 

associated person of any such registrant, 

or 

(ii) A general partner, managing 

member or manager of a commodity 

pool the operator of which is excluded 

from registration under § 4.5(a)(4) of this 

chapter or § 4.13 of this chapter, 

provided that such general partner, 

managing member or manager complies 

with the requirements of § 150.4(c). 

* * * * * 

§ 150.3 [Amended] 

■ 3. Amend § 150.3 as follows: 

■ a. Remove the semicolon and the 

word ‘‘or’’ at the end of paragraph (a)(3); 

■ b. Add a period at the end of 

paragraph (a)(3); and 

■ c. Remove paragraph (a)(4). 

■ 4. Revise § 150.4 to read as follows: 

§ 150.4 Aggregation of positions. 

(a) Positions to be aggregated—(1) 

Trading control or 10 percent or greater 

ownership or equity interest. For the 

purpose of applying the position limits 

set forth in § 150.2, unless an exemption 

set forth in paragraph (b) of this section 

applies, all positions in accounts for 

which any person, by power of attorney 

or otherwise, directly or indirectly 

controls trading or holds a 10 percent or 

greater ownership or equity interest 

must be aggregated with the positions 

held and trading done by such person. 

For the purpose of determining the 

positions in accounts for which any 

person controls trading or holds a 10 

percent or greater ownership or equity 

interest, positions or ownership or 

equity interests held by, and trading 

done or controlled by, two or more 

persons acting pursuant to an expressed 

or implied agreement or understanding 

shall be treated the same as if the 

positions or ownership or equity 

interests were held by, or the trading 

were done or controlled by, a single 

person. 

(2) Substantially identical trading. 

Notwithstanding the provisions of 

paragraph (b) of this section, for the 

purpose of applying the position limits 

set forth in § 150.2, any person that, by 

power of attorney or otherwise, holds or 

controls the trading of positions in more 

than one account or pool with 

substantially identical trading strategies, 

must aggregate all such positions. 

(b) Exemptions from aggregation. For 

the purpose of applying the position 

limits set forth in § 150.2, and 

notwithstanding the provisions of 

paragraph (a)(1) of this section, but 

subject to the provisions of paragraph 

(a)(2) of this section, the aggregation 

requirements of this section shall not 

apply in the circumstances set forth in 

this paragraph (b). 

(1) Exemption for ownership by 

limited partners, shareholders or other 

pool participants. Any person that is a 

limited partner, limited member, 

shareholder or other similar type of pool 

participant holding positions in which 

the person by power of attorney or 

otherwise directly or indirectly has a 10 

percent or greater ownership or equity 

interest in a pooled account or positions 

need not aggregate the accounts or 

positions of the pool with any other 

accounts or positions such person is 

required to aggregate, except that such 

person must aggregate the pooled 

account or positions with all other 

accounts or positions owned or 

controlled by such person if such 

person: 

(i) Is the commodity pool operator of 

the pooled account; 

(ii) Is a principal or affiliate of the 

operator of the pooled account, unless: 

(A) The pool operator has, and 

enforces, written procedures to preclude 

the person from having knowledge of, 

gaining access to, or receiving data 

about the trading or positions of the 

pool; 

(B) The person does not have direct, 

day-to-day supervisory authority or 

control over the pool’s trading 

decisions; 

(C) The person, if a principal of the 

operator of the pooled account, 

maintains only such minimum control 

over the commodity pool operator as is 

consistent with its responsibilities as a 

principal and necessary to fulfill its 

duty to supervise the trading activities 

of the commodity pool; and 

(D) The pool operator has complied 

with the requirements of paragraph (c) 

of this section on behalf of the person 

or class of persons; or 

(iii) Has, by power of attorney or 

otherwise directly or indirectly, a 25 

percent or greater ownership or equity 

interest in a commodity pool, the 

operator of which is exempt from 

registration under § 4.13 of this chapter. 

(2) Exemption for certain ownership 

of greater than 10 percent in an owned 

entity. Any person with an ownership or 

equity interest in an owned entity of 10 

percent or greater but not more than 50 

percent (other than an interest in a 

pooled account subject to paragraph 

(b)(1) of this section), need not aggregate 

the accounts or positions of the owned 

entity with any other accounts or 

positions such person is required to 

aggregate, provided that: 

(i) Such person, including any entity 

that such person must aggregate, and the 

owned entity: 

(A) Do not have knowledge of the 

trading decisions of the other; 

(B) Trade pursuant to separately 

developed and independent trading 

systems; 

(C) Have and enforce written 

procedures to preclude each from 

having knowledge of, gaining access to, 

or receiving data about, trades of the 

other. Such procedures must include 

document routing and other procedures 

or security arrangements, including 

separate physical locations, which 

would maintain the independence of 

their activities; 

(D) Do not share employees that 

control the trading decisions of either; 

and 

(E) Do not have risk management 

systems that permit the sharing of trades 

or trading strategy; and 

(ii) Such person complies with the 

requirements of paragraph (c) of this 

section. 

(3) Exemption for certain ownership 

of greater than 50 percent in an owned 

entity. Any person with a greater than 

50 percent ownership or equity interest 

in an owned entity (other than an 

interest in a pooled account subject to 

paragraph (b)(1) of this section), need 

not aggregate the accounts or positions 

of the owned entity with any other 

accounts or positions such person is 

required to aggregate, provided that: 

(i) Such person certifies to the 

Commission that the owned entity is not 

required under U.S. generally accepted 

accounting principles to be, and is not, 

consolidated on the financial statement 

of such person; 

(ii) Such person, including any entity 

that such person must aggregate, and the 

owned entity meet the requirements of 

paragraphs (b)(2)(i)(A) through (E) of 

this section and such person 

demonstrates to the Commission that 

procedures are in place that are 


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reasonably effective to prevent 

coordinated trading decisions by such 

person, any entity that such person 

must aggregate, and the owned entity; 

(iii) Each representative (if any) of the 

person on the owned entity’s board of 

directors (or equivalent governance 

body) certifies that he or she does not 

control the trading decisions of the 

owned entity; 

(iv) Such person certifies to the 

Commission that either all of the owned 

entity’s positions qualify as bona fide 

hedging transactions or the owned 

entity’s positions that do not so qualify 

do not exceed 20 percent of any position 

limit currently in effect, and agrees with 

the Commission that: 

(A) If such certification becomes 

untrue for any owned entity of the 

person, such person will aggregate the 

accounts or positions of the owned 

entity with any other accounts or 

positions such person is required to 

aggregate; however, after a period of 

three complete calendar months in 

which such person aggregates such 

accounts or positions and all of the 

owned entity’s positions qualify as bona 

fide hedging transactions, such person 

may make such certification again and 

be permitted to cease such aggregation; 

(B) Any owned entity of the person 

shall, upon call by the Commission at 

any time, make a filing responsive to the 

call, reflecting only such owned entity’s 

positions and transactions, and not 

reflecting the inventory of the person or 

any other accounts or positions such 

person is required to aggregate (this 

requirement shall apply regardless of 

whether the owned entity or the person 

is subject to § 18.05 of this chapter); and 

(C) Such person shall inform the 

Commission, and provide to the 

Commission any information that the 

Commission may request, if any owned 

entity engages in coordinated activity 

regarding the trading of such owned 

entity, such person, or any other 

accounts or positions such person is 

required to aggregate, even if such 

coordinated activity does not conflict 

with any of the requirements of 

paragraphs (b)(2)(i)(A) to (b)(2)(i)(E) of 

this section; 

(v) The Commission finds, in its 

discretion, that such person has 

satisfied the conditions of this 

paragraph (b)(3); 

(vi) Such person, when first 

requesting disaggregation relief under 

this paragraph, complies with the 

requirements of paragraph (c)(2) of this 

section; and 

(vii) Such person complies with the 

requirements of paragraph (c)(1) of this 

section if, subsequent to a Commission 

finding that the person has satisfied the 

conditions of this paragraph (b)(3), there 

is a material change to the information 

provided to the Commission in the 

person’s original filing under paragraph 

(c)(2) of this section. 

(4) Exemption for accounts held by 

futures commission merchants. A 

futures commission merchant or any 

affiliate of a futures commission 

merchant need not aggregate positions it 

holds in a discretionary account, or in 

an account which is part of, or 

participates in, or receives trading 

advice from a customer trading program 

of a futures commission merchant or 

any of the officers, partners, or 

employees of such futures commission 

merchant or of its affiliates, if: 

(i) A person other than the futures 

commission merchant or the affiliate 

directs trading in such an account; 

(ii) The futures commission merchant 

or the affiliate maintains only such 

minimum control over the trading in 

such an account as is necessary to fulfill 

its duty to supervise diligently trading 

in the account; 

(iii) Each trading decision of the 

discretionary account or the customer 

trading program is determined 

independently of all trading decisions 

in other accounts which the futures 

commission merchant or the affiliate 

holds, has a financial interest of 10 

percent or more in, or controls; and 

(iv) The futures commission merchant 

or the affiliate has complied with the 

requirements of paragraph (c) of this 

section. 

(5) Exemption for accounts carried by 

an independent account controller. An 

eligible entity need not aggregate its 

positions with the eligible entity’s client 

positions or accounts carried by an 

authorized independent account 

controller, as defined in § 150.1(e), 

except for the spot month in physicaldelivery commodity contracts, provided 

that the eligible entity has complied 

with the requirements of paragraph (c) 

of this section, and that the overall 

positions held or controlled by such 

independent account controller may not 

exceed the limits specified in § 150.2. 

(i) Additional requirements for 

exemption of affiliated entities. If the 

independent account controller is 

affiliated with the eligible entity or 

another independent account controller, 

each of the affiliated entities must: 

(A) Have, and enforce, written 

procedures to preclude the affiliated 

entities from having knowledge of, 

gaining access to, or receiving data 

about, trades of the other. Such 

procedures must include document 

routing and other procedures or security 

arrangements, including separate 

physical locations, which would 

maintain the independence of their 

activities; provided, however, that such 

procedures may provide for the 

disclosure of information which is 

reasonably necessary for an eligible 

entity to maintain the level of control 

consistent with its fiduciary 

responsibilities to the managed 

positions and accounts and necessary to 

fulfill its duty to supervise diligently the 

trading done on its behalf; 

(B) Trade such accounts pursuant to 

separately developed and independent 

trading systems; 

(C) Market such trading systems 

separately; and 

(D) Solicit funds for such trading by 

separate disclosure documents that meet 

the standards of § 4.24 or § 4.34 of this 

chapter, as applicable, where such 

disclosure documents are required 

under part 4 of this chapter. 

(6) Exemption for underwriting. A 

person need not aggregate the positions 

or accounts of an owned entity if the 

ownership or equity interest is based on 

the ownership of securities constituting 

the whole or a part of an unsold 

allotment to or subscription by such 

person as a participant in the 

distribution of such securities by the 

issuer or by or through an underwriter. 

(7) Exemption for broker-dealer 

activity. A broker-dealer registered with 

the Securities and Exchange 

Commission, or similarly registered 

with a foreign regulatory authority, need 

not aggregate the positions or accounts 

of an owned entity if such broker-dealer 

does not have greater than a 50 percent 

ownership or equity interest in the 

owned entity and the ownership or 

equity interest is based on the 

ownership of securities acquired in the 

normal course of business as a dealer, 

provided that such person does not have 

actual knowledge of the trading 

decisions of the owned entity. 

(8) Exemption for information sharing 

restriction. A person need not aggregate 

the positions or accounts of an owned 

entity if the sharing of information 

associated with such aggregation (such 

as, only by way of example, information 

reflecting the transactions and positions 

of a such person and the owned entity) 

creates a reasonable risk that either 

person could violate state or federal law 

or the law of a foreign jurisdiction, or 

regulations adopted thereunder, 

provided that such person does not have 

actual knowledge of information 

associated with such aggregation, and 

provided further that such person has 

filed a prior notice pursuant to 

paragraph (c) of this section and 

included with such notice a written 

memorandum of law explaining in 

detail the basis for the conclusion that 


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the sharing of information creates a 

reasonable risk that either person could 

violate state or federal law or the law of 

a foreign jurisdiction, or regulations 

adopted thereunder. However, the 

exemption in this paragraph shall not 

apply where the law or regulation serves 

as a means to evade the aggregation of 

accounts or positions. All documents 

submitted pursuant to this paragraph 

shall be in English, or if not, 

accompanied by an official English 

translation. 

(9) Exemption for higher-tier entities. 

If an owned entity has filed a notice 

under paragraph (c) of this section, any 

person with an ownership or equity 

interest of 10 percent or greater in the 

owned entity need not file a separate 

notice identifying the same positions 

and accounts previously identified in 

the notice filing of the owned entity, 

provided that: 

(i) Such person complies with the 

conditions applicable to the exemption 

specified in the owned entity’s notice 

filing, other than the filing 

requirements; and 

(ii) Such person does not otherwise 

control trading of the accounts or 

positions identified in the owned 

entity’s notice. 

(iii) Upon call by the Commission, 

any person relying on the exemption in 

this paragraph (b)(9) shall provide to the 

Commission such information 

concerning the person’s claim for 

exemption. Upon notice and 

opportunity for the affected person to 

respond, the Commission may amend, 

suspend, terminate, or otherwise modify 

a person’s aggregation exemption for 

failure to comply with the provisions of 

this section. 

(c) Notice filing for exemption. (1) 

Persons seeking an aggregation 

exemption under paragraph (b)(1)(ii), 

(b)(2), (b)(3)(vii), (b)(4), (b)(5), or (b)(8) 

of this section shall file a notice with 

the Commission, which shall be 

effective upon submission of the notice, 

and shall include: 

(i) A description of the relevant 

circumstances that warrant 

disaggregation; and 

(ii) A statement of a senior officer of 

the entity certifying that the conditions 

set forth in the applicable aggregation 

exemption provision have been met. 

(2) Persons with a greater than 50 

percent ownership or equity interest in 

an owned entity seeking an aggregation 

exemption under paragraph (b)(3)(vi) of 

this section shall file a request with the 

Commission, which shall not become 

effective unless and until the 

Commission finds, in its discretion, that 

such person has satisfied the conditions 

of paragraph (b)(3) of this section, and 

shall include: 

(i) A description of the relevant 

circumstances that warrant 

disaggregation; 

(ii) A statement of a senior officer of 

the entity certifying that the conditions 

set forth in paragraph (b)(3) of this 

section have been met; 

(iii) A demonstration that procedures 

are in place that are reasonably effective 

to prevent coordinated trading decisions 

by such person, any entity that such 

person must aggregate, and the owned 

entity; and 

(iv) All certifications required under 

paragraph (b)(3) of this section. 

(3) Upon call by the Commission, any 

person claiming an aggregation 

exemption under this section shall 

provide such information demonstrating 

that the person meets the requirements 

of the exemption, as is requested by the 

Commission. Upon notice and 

opportunity for the affected person to 

respond, the Commission may amend, 

suspend, terminate, or otherwise modify 

a person’s aggregation exemption for 

failure to comply with the provisions of 

this section. 

(4) In the event of a material change 

to the information provided in any 

notice filed under this paragraph (c), an 

updated or amended notice shall 

promptly be filed detailing the material 

change. 

(5) Any notice filed under this 

paragraph (c) shall be submitted in the 

form and manner provided for in 

paragraph (d) of this section. 

(d) Form and manner of reporting and 

submitting information or filings. Unless 

otherwise instructed by the Commission 

or its designees, any person submitting 

reports under this section shall submit 

the corresponding required filings and 

any other information required under 

this part to the Commission using the 

format, coding structure, and electronic 

data transmission procedures approved 

in writing by the Commission. Unless 

otherwise provided in this section, the 

notice shall be effective upon filing. 

When the reporting entity discovers 

errors or omissions to past reports, the 

entity shall so notify the Commission 

and file corrected information in a form 

and manner and at a time as may be 

instructed by the Commission or its 

designee. 

(e) Delegation of authority to the 

Director of the Division of Market 

Oversight. (1) The Commission hereby 

delegates, until it orders otherwise, to 

the Director of the Division of Market 

Oversight or such other employee or 

employees as the Director may designate 

from time to time, the authority: 

(i) In paragraph (b)(3) of this section: 

(A) To determine, after consultation 

with the General Counsel or such other 

employee or employees as the General 

Counsel may designate from time to 

time, if a person has satisfied the 

conditions of paragraph (b)(3) of this 

section; and 

(B) To call for additional information 

from a person claiming the exemption 

in paragraph (b)(3) of this section, 

reflecting such owned entity’s positions 

and transactions (regardless of whether 

the owned entity or the person is subject 

to § 18.05 of this chapter). 

(ii) In paragraph (b)(9)(iii) of this 

section to call for additional information 

from a person claiming the exemption 

in paragraph (b)(9)(i) of this section. 

(iii) In paragraph (d) of this section for 

providing instructions or determining 

the format, coding structure, and 

electronic data transmission procedures 

for submitting data records and any 

other information required under this 

part. 

(2) The Director of the Division of 

Market Oversight may submit to the 

Commission for its consideration any 

matter which has been delegated in this 

section. 

(3) Nothing in this section prohibits 

the Commission, at its election, from 

exercising the authority delegated in 

this section. 

Issued in Washington, DC, on November 8, 

2013, by the Commission. 

Christopher J. Kirkpatrick, 

Deputy Secretary of the Commission. 

Appendices to Aggregation of 

Positions—Commission Voting 

Summary and Statement of Chairman 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Gensler and 

Commissioners Chilton, O’Malia, and Wetjen 

voted in the affirmative; no Commissioner 

voted in the negative. 

Appendix 2—Statement of Chairman 

Gary Gensler 

I support the proposed rule that would 

modify the CFTC’s aggregation provisions for 

limits on speculative positions. 

As we move forward on position limits for 

futures and swaps, it is important to 

concurrently implement reforms to the 

Commission’s current regulations regarding 

which positions are totaled up as being 

owned or controlled by a particular entity. 

These total, aggregated positions under 

common control are then subject to the 

speculative position limits, taking into 

consideration any relevant exemptions. 

We live in a time when companies often 

have numerous affiliated entities, sometimes 


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measured in the hundreds or thousands. 

Thus, it is appropriate to look at how 

speculative position limits apply across the 

enterprise. When Lehman Brothers failed, it 

had 3,300 legal entities within its corporate 

family. The question is—do you count all 

those 3,300 legal entities that Lehman 

Brothers once controlled, or do you apply a 

limit for each and every one of the 3,300? If 

we chose the second, that would be, in 

practice, a loophole around congressional 

intent. That’s why this issue of aggregation 

comes into play. 

The proposal generally provides for 

aggregation when various entities are under 

common control. For instance, if the 

ownership interest is greater than 50 percent, 

it will be presumed to be aggregated and part 

of the group. 

The proposal provides for certain 

exemptions from aggregation for the 

following reasons: 

• Where sharing of information would 

violate or create reasonable risk of violating 

a federal, state or foreign jurisdiction law or 

regulation; 

• Where an ownership interest is less than 

50 percent and trading is independently 

controlled; 

• Where an ownership interest is greater 

than 50 percent in a non-consolidated entity 

whose trading is independently controlled, 

and an applicant certifies that such entity’s 

positions either qualify as bona fide hedging 

positions or do not exceed 20 percent of any 

position limit; or 

• Where ownership of less than 50 percent 

results from broker-dealer activities in the 

normal course of business. 

[FR Doc. 2013–27339 Filed 11–14–13; 8:45 am] 

BILLING CODE 6351–01–P 


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