Federal Speculative Positio

Limits

Jim OverdahlChief EconomistU.S. Commodity Futures Trading Commiss
Different Kinds of Speculativ

Position Limits

Spot month limitsNon-spot month individual limitsAll-months-combined limitsAccountability limits
Purposes of Speculative

Position Limits

To reduce the potential threat of marmanipulation or congestion.To reduce the potential of price distoTo mitigate clearinghouse credit risk.
History of Federal Speculativ

Position Limits

First enumerated by the Commodity Exchange Commission (CEC) in 1938.

 Wheat, corn, oats, barley, flaxseed, 

sorghams, and rye (1938).

 Cotton added in 1940. Soybeans added 1951. Fats and oils added in 1953; revoked 

1968.

 Lard, onions, eggs, and potatoes at 

times.

 Soybean oil and soybean meal adde

1987
History of Federal Speculativ

Position Limits

The CEC never established speculposition limits for many agriculturacommodities subject to its jurisdic

 Butter, wool tops, livestock, livestoc

products not included.

 Exchanges under their own authority 

established speculative position limitCME pork bellies (1961) and live hog(1966).
History of Federal Speculativ

Position limits

Since the CFTC’s founding in 1974, it hretained Federal speculative position limthose commodities where such limits hpreviously been established (CFTC reg150.2).For each enumerated commodity, CFTC Regulation 150.2 establishes a spot molimit, non-spot individual month limit, aall-months-combined speculative positilimit.
History of Federal Speculativ

Positions Limits

In 1981 the CFTC required exchanges establish speculative position limits for commodities not subject to Federal lim(CFTC regulation 150.5).
Summary of Position Limit His

Through 2000

Federal Speculative Position Limits werretained for enumerated commodities wsuch limits were established prior to thcreation of the CFTC in 1974.For other commodities, speculative poslimits or position accountability limits wby the exchanges subject to CFTC oveand enforcement.
Current Single Month Limits 

(Contracts)CBOT Corn.................. 5,500CBOT Oats................... 1,000CBOT Soybeans .......... .3,500 CBOT Wheat ................ 3,000 CBOT Soybean Oil ..... 3,000CBOT Soybean Meal .. 3,000MGE Red Wheat...... .. 3,000MGE White Wheat .... 1,200NYBOT Cotton #2...... .2,500KCBT Winter Wheat.. .. 3,000
Current All-Months-Combined 

Limits (Contracts)CBOT Corn.................. 9,000CBOT Oats................... 1,500CBOT Soybeans .......... .5,500 CBOT Wheat ................ 4,000 CBOT Soybean Oil ..... 4,000CBOT Soybean Meal .. 4,000MGE Red Wheat...... .. 4,000MGE White Wheat .... 4,000NYBOT Cotton #2...... .3,500KCBT Winter Wheat.. .. 4,000
Current Spot Month Limits 

(Contracts)CBOT Corn.................. 600CBOT Oats................... 600CBOT Soybeans .......... 600 CBOT Wheat ................600 CBOT Soybean Oil ..... 540CBOT Soybean Meal .. 720MGE Red Wheat........ 600MGE White Wheat .... 600NYBOT Cotton #2...... 300KCBT Winter Wheat.. .. 600
The Commodity Futures 

Modernization Act of 2000

Established designation criteria and coprinciples with which a designated conmarket must comply in order to maintadesignation.
Core Principle 5

“Position Limitations or Accountability—reduce the potential threat of market manipulation or congestion, especially trading in the delivery month, the boartrade shall adopt position limitations or position accountability for speculators, necessary and appropriate.”
CFTC Guidance on

Core Principle 5

Spot-month limits should be adopted fomarkets based on commodities having limited deliverable supplies or where otherwise necessary to minimize the susceptibility of the market to manipulaprice distortions.
CFTC Guidance on

Core Principle 5

Markets may elect not to provide all-mcombined and non-spot individual monlimits.
CBOT, KCBT, and MGE 

Petitions

Repeal or amend CFTC Regulation 150If Regulation 150.2 is retained, the KCthe MGE request continuing parity in Fspeculative position limits for wheat cotraded on different exchanges.
CFTC’s Request for Comments

Should the Commission continue to imFederal speculative position limits for tagricultural commodities enumerated iRegulation 150.2?Should these commodities be treated differently from other agricultural and agricultural commodities where the Commission does not impose federal speculative position limits?
CFTC’s Request for Comments

Should CFTC Regulation 150.2 be modeliminate limits for the non-spot monthindividual-months, or all-months combIf CFTC Regulation 150.2 is modified, wcriteria should be used in determining acceptable position limits?
CFTC’s Request for Comments

If Federal speculative position limits arretained, should the increases requestethe CBOT be granted? Should request KCBT and the MGE for parity in setting be granted?Should the acceptable practices for CoPrinciple 5 be revised?