A Phased Approach 

to CFTC Position Limits 

Energy and Environmental 

Markets Advisory Committee 

(EEMAC) Meeting

July 29, 2015
Analyze the Available Market Data 

• Before imposing position limits, the Commission should conduct 

an empirical analysis of available futures and swaps data 

• Absent a quantitative analysis, the Commission should phase in 

position limits starting with the spot month (Phase 1) and then 

consider non-spot month position limits thereafter (Phase 2)

• A phased approach helps mitigate against unintended 

consequences

CFTC EEMAC MEETING | JULY 29, 2015 2
Phase 1: Spot Month Position Limits 

Phase 1: Spot-month limits for the 28 core referenced contracts

• Market participants have experience with CFTC and Exchange

spot-month limits for the 28 core referenced futures contracts

• FIA recommends a 9-month implementation period after 

finalizing the rule because market participants need time to: 

– Develop systems to monitor compliance with the new spotmonth limits for futures and swaps

– Get accustomed to the CFTC’s bona fide hedging forms, 

which differ significantly from the current exchange 

process for bona fide hedging 

CFTC EEMAC MEETING | JULY 29, 2015 3
Phase 2: Non-Spot Month Position Limits 

Phase 2: After the Commission and market participants gain 

experience implementing federal spot-month limits (Phase 1), the 

Commission should reconsider position limits outside of the spot 

month 

• This means reconsidering non-spot month limits in a subsequent 

rulemaking

• Because of the limited liquidity available outside the spot 

month, the Commission should take care first to find that 

position limits outside the spot month are necessary and that 

the levels of any limits are appropriate

CFTC EEMAC MEETING | JULY 29, 2015 4
Benefits to Phasing-in Position Limits 

• Allows the Commission to evaluate current futures and swaps 

data to understand market size and available liquidity 

• Prioritizes Commission resources on the administration of spotmonth limits where there may be more of a threat of 

manipulation than there is further out the curve

• Provides an opportunity for market participants to become 

accustomed to the new spot-month limit regime in advance of 

potential non-spot month position limits

• Provides valuable experience implementing the definition of 

bona fide hedging and the opportunity to make adjustments

• Permits further consideration of accountability levels 

CFTC EEMAC MEETING | JULY 29, 2015 5
Accountability Levels

• Accountability levels have a proven track record of deterring 

excessive speculation without harming liquidity in deferred 

months 

• The Commission has authority to impose accountability levels 

outside the spot month (FIA Comment Letter March 30, 2015) 

• During Phase 1, the Commission should evaluate whether to 

propose accountability levels outside the spot month 

• To conserve resources, the Commission could delegate 

administration of accountability levels to the DCMs and 

propose an implementation framework

CFTC EEMAC MEETING | JULY 29, 2015 6
Authority to Phase-In Limits

• The Commission has authority to phase in limits outside the 

spot month

• In prior rulemakings, the Commission acknowledged that it has 

the discretion to phase-in position limits at a later date for 

contracts beyond the 28 core referenced futures contracts

– The same authority supports phasing in limits outside the 

spot month 

• CEA Section 4a(a)(7) also provides the Commission with broad 

exemptive authority to phase in non-spot month limits

CFTC EEMAC MEETING | JULY 29, 2015 7