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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. The 

Commission has proposed to amend its position 

limits to also encompass other exempt and 

agricultural commodity futures and options 

contracts and the physical commodity swaps that 

are economically equivalent to such contracts. See 

Position Limits for Derivatives, 78 FR 75680 (Dec. 

12, 2013). 

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 Position Limits for Futures and Swaps, 76 

FR 71626 (Nov. 18, 2011). With regard to 

determining which accounts and positions a person 

must aggregate, regulation 151.7 (now vacated, see 

footnote 13, below) implemented the Commission’s 

existing aggregation policy under regulation 150.4 

and 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. With the exception 

of the exemption for underwriters, vacated 

regulation 151.7 required market participants to file 

a notice with the Commission demonstrating 

compliance with the conditions applicable to each 

exemption. 

12See Aggregation, Position Limits for Futures 

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

13See International Swaps and Derivatives 

Association v. United States Commodity Futures 

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

2012). The revised position limit levels in amended 

section 150.2 were not vacated. 

14See Aggregation of Positions; Proposed Rule, 78 

FR 68946 (Nov. 15, 2013). 

15See Proposed Rule, 78 FR at 68947–48. 

16See Aggregation of Positions: Supplemental 

notice of proposed rulemaking, 80 FR 58365 (Sept. 

29, 2015). 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 150 

RIN 3038–AD82 

Aggregation of Positions 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final rule. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is issuing a final rule to amend 

part 150 of the Commission’s 

regulations with respect to the policy for 

aggregation under the Commission’s 

position limits regime for futures and 

option contracts on nine agricultural 

commodities. The Commission notes 

that if its proposed position limits 

regime for other exempt and agricultural 

commodity futures and options 

contracts and the physical commodity 

swaps that are economically equivalent 

to such contracts are finalized, these 

amended regulations would also apply 

to the position limits regime for those 

contracts and swaps. 

DATES: The effective date for this final 

rule is February 14, 2017. 

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: 

Table of Contents 

I. Background 

II. Final Rules 

A. Aggregation on the Basis of Ownership 

or Control of Positions in Rule 

150.4(a)(1) and Related Exemption From 

Aggregation in Rule 150.4(b)(2) 

B. Criteria for Aggregation Relief in Rule 

150.4(b)(2)(i) 

C. Notice Filing Requirement in Rule 

150.4(c) 

D. Other Issues Related to Aggregation on 

the Basis of Ownership 

E. Exemption for Certain Accounts Held by 

FCMs in Rule 150.4(b)(3) 

F. Exemptions From Aggregation for 

Underwriting and Broker-Dealer 

Activities in Rules 150.4(b)(5) and (b)(6) 

G. Exemption From Aggregation Where 

Information Sharing Would Violate Law 

in Rule 150.4(b)(7) 

H. Aggregation Requirement for 

Substantially Identical Trading in Rule 

150.4(a)(2) 

I. Exemption for Ownership by Limited 

Partners, Shareholders or Other Pool 

Participants in Rule 150.4(b)(1) 

J. Exemption for Accounts Carried by an 

Independent Account Controller in Rule 

150.4(b)(4) and Conforming Change in 

Rule 150.1 

K. Revisions To Clarify Regulations 

III. Related Matters 

A. Considerations of Costs and Benefits 

B. Regulatory Flexibility Act 

C. Paperwork Reduction Act 

I. Background 

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 and 

accounts for which that person controls 

the trading decisions with all positions 

and accounts in which that person has 

a 10 percent or greater ownership 

interest, and with the positions of any 

other persons with which the person is 

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 (‘‘IAC’’) that manage 

customer positions.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

The Commission adopted aggregation 

rules in 2011, as part of its adoption of 

part 151 of its regulations, that were 

largely similar to the existing 

aggregation policy under regulation 

150.4.11 In 2012, the Commission 

proposed to amend the aggregation rules 

in part 151.12 Prior to finalization of the 

2012 amendments, however, part 151 of 

the Commission’s regulations was 

vacated by court order.13

In November 2013, the Commission 

proposed to amend the existing 

aggregation rules in regulation 150.4, 

and certain related regulations, to 

modify rules to determine which 

accounts and positions a person must 

aggregate.14 This proposal and the 

related notice of proposed rulemaking 

are referred to herein as the ‘‘Proposed 

Rule.’’ The Proposed Rule was 

substantially similar to the aggregation 

rules that had been adopted in part 151 

of the Commission’s regulations in 

2011, as they were proposed to be 

amended in May 2012.15 After 

reviewing public comments on the 

Proposed Rule, the Commission 

supplemented it with a limited revision 

in September 2015 that would permit 

the disaggregation of positions of owned 

entities in expanded circumstances.16

This supplement to the proposal and the 


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17The public comments on the Proposed Rule 

and the Supplemental Notice are available at http:// 

comments.cftc.gov/PublicComments/Comment

List.aspx?id=1620. 

18See Proposed Rule, 78 FR at 68956, citing 7 

U.S.C. 6a(a)(1) (‘‘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’’). 

19See Proposed Rule, 78 FR at 68958. 

20The 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, 44 FR 33839, 33843 (June 13, 

1979) (‘‘1979 Aggregation Policy’’). Note, however, 

that proposed rule 150.4(a)(2) would also separately 

require aggregation of investments in accounts with 

substantially identical trading strategies. 

21See Proposed Rule, 78 FR at 68951. 

22See id. 

23See id, citing Exemptions from Speculative 

Position Limits for Positions which have a Common 

Owner but which are Independently Controlled and 

for Certain Spread Positions; Proposed Rule, 53 FR 

13290, 13292 (Apr. 22, 1988). 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? 

24See Proposed Rule, 78 FR at 68951, citing 

Aggregation, Position Limits for Futures and Swaps, 

77 FR 31767, 31773 (May 30, 2012). This 

incremental approach to account aggregation 

standards reflects the Commission’s historical 

practice. See, e.g., Exemptions from Speculative 

Position Limits for Positions Which Have a 

Common Owner But Which are Independently 

Controlled and for Certain Spread Positions; Final 

Rule, 53 FR 41563, 41567 (Oct. 24, 1988) (the 

definition of eligible entity for purposes of the IAC 

exemption originally only included commodity 

pool operators (‘‘CPOs’’), or exempt CPOs or pools, 

but the Commission indicated a willingness to 

expand the exemption after a ‘‘reasonable 

opportunity’’ to review the exemption.); Exemption 

From Speculative Position Limits for Positions 

Which Have a Common Owner, But Which Are 

Independently Controlled, 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 

Revision of Federal Speculative Position Limits and 

Associated Rules, 64 FR 24038 (May 5, 1999) 

(‘‘1999 Amendments’’) (the Commission expanded 

the list of eligible entities to include many of the 

entities commenters requested in the 1991 

rulemaking). 

25See Proposed Rule, 78 FR at 68958–61. 

related supplemental notice of proposed 

rulemaking are referred to herein as the 

‘‘Supplemental Notice.’’ 

II. Final Rules 

The Commission is adopting the 

amendments to its aggregation rules in 

regulation 150.4, and certain related 

regulations, as set forth in the Proposed 

Rule and modified in the Supplemental 

Notice, with certain further changes 

made in response to public comments. 

The amendments and the public 

comments relevant to each amendment 

are discussed below.17

A. Aggregation on the Basis of 

Ownership or Control of Positions in 

Rule 150.4(a)(1) and Related Exemption 

From Aggregation in Rule 150.4(b)(2) 

1. Proposed Approach 

The Proposed Rule reflected the 

Commission’s long-standing 

incremental approach to exemptions 

from the aggregation requirement for 

persons owning a financial interest in 

an entity. The Proposed Rule 

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.18 In 

addition, the Proposed Rule explained 

that the Commission’s historical 

practice has been to craft narrowlytailored exemptions, when and if 

appropriate, to the basic requirement of 

aggregation when there is either 

ownership or control of an entity. On 

this basis, proposed rule 150.4(a)(1) 

would maintain the requirement in 

existing regulation 150.4(b) that 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 be 

aggregated with the positions held and 

trading done by such person. 

To explain the basis for maintaining 

the existing 10 percent threshold level, 

the Commission noted 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.19 As 

such, the Commission has exempted an 

ownership interest below 10 percent 

from the aggregation requirement, while 

requiring aggregation when there is an 

ownership interest above 10 percent.20

Prior comments, discussed in the 

Proposed Rule, had advocated that an 

ownership interest of 10 percent or 

more should also be exempt from the 

aggregation requirement, so long as such 

ownership represents a passive 

investment that does not involve control 

of the trading decisions of the owned 

entity.21 The prior commenters had 

asserted that such passive investments 

would be unlikely to allow the owner to 

directly or indirectly control the trading 

of the owned entity, and therefore 

would be unlikely to present a risk that 

persons would be able to hold an 

unduly large overall position through 

positions in multiple accounts.22

Responding to these prior comments, 

the Commission explained in the 

Proposed Rule that it had previously 

considered, but not adopted, a broad 

passive investment exemption from the 

aggregation requirement, and had 

instead generally restricted exemptions 

based on ownership to those for FCMs, 

limited partner investors in commodity 

pools, and IACs managing customer 

funds for an eligible entity.23 Further, 

the Proposed Rule reiterated the 

Commission’s belief in incremental 

development of aggregation exemptions 

over time.24 Consistent with that 

incremental approach, the Proposed 

Rule maintained the 10 percent 

threshold in the existing regulation but 

proposed to adopt specific, tailored 

relief from the ownership criteria of 

aggregation for certain situations. 

a. Initial Ownership Threshold for 

Disaggregation Relief in the Proposed 

Rule 

The Proposed Rule included two tiers 

of relief from the ownership criteria of 

aggregation—relief on the basis of a 

notice filing, effective upon submission, 

by persons holding an interest of 

between 10 percent and 50 percent in an 

owned entity, and relief on the basis of 

an application by persons holding an 

interest of more than 50 percent in an 

owned entity.25 Each of these 

procedures for relief in the Proposed 

Rule is described briefly below. 

The Proposed Rule set out 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 


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26Under the Proposed Rule, 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 were 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). 

27See Proposed Rule, 78 FR at 68959. 

28See id. 

29See Proposed Rule, 78 FR at 68959–61. This 

approach was consistent with the Commission’s 

preliminary view 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 explained that, in its view, 

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. See id. 

30See Proposed Rule, 78 FR at 68960. 

31See Supplemental Notice, 80 FR at58369. 

32See id. 

33See id. 

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.26 The notice filing would 

have to demonstrate compliance with 

certain conditions set forth in proposed 

rule 150.4(b)(2)(i). Similar to other 

exemptions from aggregation, the notice 

filing would be effective upon 

submission to the Commission, but 

under proposed rule 150.4(c) 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 proposed 

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

would be obligated by proposed rule 

150.4(c) to amend the notice filing in 

the event of a material change to the 

circumstances described in the filing. 

In the Proposed Rule, the Commission 

stated its preliminary belief 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.27 In the Proposed Rule, the 

Commission explained that 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. For 

these reasons, the Commission 

preliminarily believed that the 50 

percent limit would be appropriate to 

address the heightened risk of direct or 

indirect influence over the owned entity 

and therefore a threshold at this level 

would be a reasonable approach to the 

aggregation of owned accounts pursuant 

to Section 4a(a)(1) of the CEA.28

With respect to a person who has a 

greater than 50 percent ownership or 

equity interest in the owned entity, 

proposed rule 150.4(b)(3) included 

disaggregation relief in limited 

situations where 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. 

Under proposed rule 150.4(b)(3), a 

person with a greater than 50 percent 

ownership of an owned entity would 

have to apply on a case-by-case basis to 

the Commission for permission to 

disaggregate, and await the 

Commission’s decision as to whether 

certain conditions specified in the 

proposed rule had been satisfied and 

therefore disaggregation would be 

permitted.29 The 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 proposed 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, 

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: 

• 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, 

• 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 

• 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 relief under proposed rule 

150.4(b)(3) would not be automatic, but 

rather would be available only if the 

Commission finds, in its discretion, that 

the four conditions above are met. There 

would be no time limits on the 

Commission’s process for making the 

determination of whether relief under 

proposed rule 150.4(b)(3) is 

appropriately granted, and relief would 

be available only if and when the 

Commission acts on a particular request 

for relief.30

b. Ownership Threshold for 

Disaggregation Relief in the 

Supplemental Notice 

The Supplemental Notice discussed 

the public comments received on this 

aspect of the Proposed Rule. In brief, it 

noted that commenters generally 

praised the proposed relief for owners of 

between 10 percent and 50 percent of an 

owned entity, but commenters asserted 

that the proposed application 

procedures under proposed rule 

150.4(b)(3) for owners of a more than 50 

percent equity or ownership interest 

were unnecessary and inappropriate.31

Several commenters said that the 

Commission should provide the same 

disaggregation relief for owners of more 

than 50 percent of an owned entity as 

was proposed to be provided for owners 

of 50 percent or less.32 On the other 

hand, the Supplemental Notice noted 

that a few commenters opposed 

providing aggregation relief for owners 

of more than 10 percent of an owned 

entity.33

In view of the points raised by 

commenters on the Proposed Rule, the 

Commission proposed in the 

Supplemental Notice to delete proposed 

rules 150.4(b)(3) and 150.4(c)(2), and to 

change proposed rule 150.4(b)(2) so that 

it would apply to all persons with an 

ownership or equity interest in an 

owned entity of 10 percent or greater 

(i.e., an interest of up to and including 

100 percent) in the same manner as 

proposed rule 150.4(b)(2) would have 

applied, before this revision, to owners 


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34See Supplemental Notice, 80 FR at 58371. The 

Supplemental Notice also laid out conforming 

changes in proposed rule 150.4(b)(7), to delete a cap 

of 50 percent on the ownership or equity interest 

for broker-dealers to disaggregate, in proposed rule 

150.4(e)(1)(i), to delete a delegation of authority 

referencing proposed rule 150.4(b)(3), and in 

proposed rule 150.4(c)(1), to delete a crossreference. See id. 

35See Supplemental Notice, 80 FR at 58372, 

citing 1999 Amendments, 64 FR at 24044 (‘‘[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; Proposed Rule, 53 FR 13290, 

13292, (Apr. 22, 1988) (responding to petitions, the 

Commission proposed the IAC exemption from 

speculative position limits, but declined to remove 

the ownership standard from its aggregation policy). 

36See Supplemental Notice, 80 FR at 58371. 

37See id. The Commission notes in this regard 

that there may be significant burdens in meeting the 

requirements of proposed rule 150.4(b)(3) even 

where there is no control of the trading of the 

owned entity, as was suggested by the Center for 

Capital Markets Competitiveness of the U.S. 

Chamber of Commerce, the Asset Management 

Group of the Securities Industry and Financial 

Markets Association and the other commenters. See 

Supplemental Notice, 80 FR at 58372. 

38Supplemental Notice, 80 FR at 58371. In the 

Supplemental Notice, the Commission also 

considered that aggregation of the positions of 

majority-owned subsidiaries could require 

corporate groups to establish procedures to monitor 

and coordinate trading activities across disparate 

owned entities, which could have unpredictable 

consequences including not only the cost of 

establishing these procedures, but also the 

impairment of corporate structures which were 

established to ensure that the various owned 

entities engage in business independently. On the 

other hand, the Commission believed that the 

disaggregation criteria in proposed rule 

150.4(b)(2)(i) are in line with prudent corporate 

practices that are maintained for longstanding, wellaccepted reasons with which the Commission did 

not intend to interfere. See Supplemental Notice, 80 

FR at 58372. 

In the Proposed Rule, the Commission noted that 

if the aggregation rules adopted by the Commission 

would be a precedent for aggregation rules enforced 

by designated contract markets (‘‘DCMs’’) and swap 

execution facilities (‘‘SEFs’’), it would be even more 

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. See Proposed Rule, 78 FR at 68596, 

n. 103. In the Supplemental Notice, the 

Commission stated that implementing an approach 

to aggregation that is in keeping with longstanding 

corporate practices would promote the goal of 

setting out ‘‘bright line’’ rules that are relatively 

easy to apply while not being susceptible to 

circumvention. See Supplemental Notice, 80 FR at 

58372. 

39See Supplemental Notice, 80 FR at 58371. See 

also Proposed Rule, 78 FR at 68961, referring to 

regulation 150.3(a)(4) (proposed 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. The disaggregation criteria require that the 

two entities not have knowledge of each other’s 

trading and, moreover, have and enforce written 

procedures to preclude such knowledge. 

40See Honorable Carl Levin, United States Senate 

on February 10, 2014 (‘‘CL-Sen. Levin Feb 10’’), see 

also Americans for Financial Reform on February 

10, 2014 (Commission should trigger automatic 

aggregation for an ownership interest well under 50 

percent, because potential aggregation exemptions 

for ownership interests over 10 percent may 

undermine the proposed limits). 

41See CL-Sen. Levin Feb 10. 

42See Supplemental Notice, 80 FR at 58371. The 

Commission noted in the Proposed Rule that if 

there were no aggregation on the basis of 

ownership, it would have to apply a control test in 

all cases, which would pose significant 

administrative challenges to individually assess 

control across all market participants. See Proposed 

Rule, 78 FR at 68956. Further, the Commission 

considered that if the statute required aggregation 

only if the existence of control were proven, market 

participants may be able to use an ownership 

interest to directly or indirectly influence the 

account or position and thereby circumvent the 

aggregation requirement. See id. On further review 

and after considering the comments on the 

Proposed Rule, the Commission stated in the 

Supplemental Notice that the disaggregation criteria 

in proposed rule 150.4(b)(2)(i) provide an effective, 

easily implemented means of applying a ‘‘control 

test’’ to determine if disaggregation should be 

allowed, without creating a loophole through which 

Continued 

of an interest of between 10 percent and 

50 percent.34 The Commission stated in 

the Supplemental Notice that, while the 

language in section 4a of the CEA, its 

legislative history, subsequent 

regulatory developments, and the 

Commission’s historical practices in this 

regard all support aggregation on the 

basis of either ownership or control of 

an entity as a necessary part of the 

Commission’s position limit regime,35

the Commission is also mindful that, as 

discussed by commenters on the 

Proposed Rule, aggregation of positions 

held by owned entities may in some 

cases be impractical, burdensome, or 

not in keeping with modern corporate 

structures. 

The Commission explained that the 

modifications in the Supplemental 

Notice would address comments that 

ownership of a greater than 50 percent 

interest in an entity (and the related 

consolidation of financial statements) 

may not mean that the owner actually 

controls day-to-day trading decisions of 

the owned entity.36 The Commission 

stated in the Supplemental Notice that, 

on balance, the overall purpose of the 

position limits regime (to diminish the 

burden of excessive speculation which 

may cause unwarranted changes in 

commodity prices) would be better 

served by focusing the aggregation 

requirement on situations where the 

owner is, in view of the circumstances, 

actually able to control the trading of 

the owned entity.37 The Commission 

reasoned that the ability to cause 

unwarranted changes in the price of a 

commodity derivatives contract would 

result from the owner’s control of the 

owned entity’s trading activity, while 

due to variances in corporate structures 

there may be instances where one entity 

has a 100 percent ownership interest in 

another entity yet does not control dayto-day business activities of the owned 

entity. In this situation the owned entity 

would not have knowledge of the 

activities of other entities owned by the 

same owner, nor would it raise the 

heightened concerns, triggered when 

one entity both owns and controls 

trading of another entity, that the owner 

would necessarily act in a coordinated 

manner with other owned entities.38

Prior to issuing the Supplemental 

Notice, the Commission considered the 

views of commenters who warned that 

inappropriate relief from the aggregation 

requirements could allow 

circumvention of position limits 

through the use of multiple subsidiaries. 

However, the Commission believed that 

the criteria in proposed rule 

150.4(b)(2)(i), which must be satisfied in 

order to disaggregate, will appropriately 

indicate whether an owner has control 

of or knowledge of the trading activity 

of the owned entity, such that if the 

disaggregation criteria are satisfied, the 

ability of an owner and the owned 

entity to act together to engage in 

excessive speculation should not differ 

significantly from that of two separate 

individuals.39

A commenter on the Proposed Rule 

had said the Commission should 

eliminate the proposed aggregation 

exemptions for ownership interests up 

to 50 percent, because such notices 

would make it virtually impossible for 

the Commission to make timely, 

informed decisions about whether one 

person in fact controls the trading 

decisions of another and whether all 

proffered certifications are accurate.40

This commenter said that, alternatively, 

the Commission should only provide 

aggregation exemptions where the 

ownership interest is no greater than 25 

percent, in order to prevent abusive 

practices, which should not become 

effective prior to Commission review of 

the facts.41

The Commission pointed out in the 

Supplemental Notice that finalization of 

proposed rule 150.4(b)(2), which would 

allow persons with ownership or equity 

interests in an owned entity of up to and 

including 100 percent to disaggregate 

the positions of the owned entity if 

certain conditions were satisfied, would 

not mean that there would be no 

aggregation on the basis of ownership. 

Rather, aggregation would still be the 

‘‘default requirement’’ for the owner of 

a 10 percent or greater interest in an 

owned entity, unless the conditions of 

proposed rule 150.4(b)(2) are satisfied.42


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market participants could circumvent the 

aggregation requirement. See Supplemental Notice, 

80 FR at 58371. 

43See Electric Power Supply Association on 

November 13, 2015 (‘‘CL–EPSA Nov 13’’); 

International Swaps and Derivatives Association on 

November 12, 2015 (‘‘CL–ISDA Nov 12’’); 

Alternative Investment Management Association on 

November 12, 2015 (‘‘CL–AIMA Nov 12’’); Asset 

Management Group of the Securities Industry and 

Financial Markets Association (‘‘SIFMA AMG’’) on 

November 13, 2015 (‘‘CL–SIFMA AMG Nov 13’’); 

International Energy Credit Association on 

November 13, 2015 (‘‘CL–IECA Nov 13’’); Energy 

Transfer Partners, L.P., on behalf of itself and 

Energy Transfer Equity, L.P. on November 13, 2015 

(‘‘CL-Energy Transfer Nov 13’’); CME Group, Inc. on 

November 13, 2015 (‘‘CL–CME Nov 13’’); Coalition 

of Physical Energy Companies on November 13, 

2015 (‘‘CL–COPE Nov 13’’); Commercial Energy 

Working Group on November 13, 2015 (‘‘C-Working 

Group Nov 13’’); Morgan, Lewis & Bockius LLP on 

November 13, 2015 (‘‘CL-Morgan Lewis Nov 13’’); 

Sempra Energy on November 13, 2015 (‘‘CL-Sempra 

Nov 13’’); Commodity Markets Council, November 

13, 2015 (‘‘CL–CMC Nov 13’’); ECOM 

Agroindustrial Corp., Ltd. on November 13, 2015 

(‘‘CL–ECOM Nov 13’’); Edison Electric Institute on 

November 13, 2015 (‘‘CL–EEI Nov 13’’); Futures 

Industry Association (‘‘FIA’’) on November 13, 2015 

(‘‘CL–FIA Nov 13’’); Ontario Teachers’ Pension Plan 

on November 13, 2015 (‘‘CL–OTPP Nov 13’’); ICE 

Futures US, Inc. on November 13, 2015 (‘‘CL–ICE 

Nov 13’’); Natural Gas Supply Association on 

November 13, 2015 (‘‘CL–NGSA Nov 13’’); Managed 

Funds Association on November 12, 2015 (‘‘CL– 

MFA Nov 12’’); Private Equity Growth Capital 

Council on November 12, 2015 (‘‘CL–PEGCC Nov 

12’’) ; Minneapolis Grain Exchange, Inc. on 

November 13, 2015. 

44See Supplemental Notice, 80 FR at 58369–70 

(describing comments of FIA, the Center for Capital 

Markets Competitiveness of the U.S. Chamber of 

Commerce, and MidAmerican Energy Holdings 

Company). 45See Better Markets, Inc. (‘‘Better Markets’’) on 

November 13, 2015 (‘‘CL-Better Markets Nov 13’’). 

The commenter had also commented on the 

Proposed Rule, saying that allowing disaggregation 

of majority-owned subsidiaries would ignore the 

clear language of CEA section 4a(a)(1). See 

Supplemental Notice, 80 FR at 58369 (describing 

comment of Better Markets). 

46See CL-Better Markets Nov 13. 

47See Occupy the SEC on November 13, 2015 

(‘‘CL-Occupy the SEC Nov 13’’). This commenter 

warned that challenges to the Commission’s 

handling of large amounts of data could likely allow 

many companies that should have their positions 

aggregated to evade that restriction. See id. The 

commenter had also commented on the Proposed 

Rule, saying that no relief from aggregation should 

be allowed for owners of more than 50 percent of 

an owned entity because in this case the two firms 

are ‘‘largely interconnected.’’ See Supplemental 

Notice, 80 FR at 58369 (describing comment of 

Occupy the SEC). 

48See Institute for Agriculture and Trade Policy 

(‘‘IATP’’) on November 13, 2015 (‘‘CL–IATP Nov 

13’’). 49See CL-Occupy the SEC Nov 13. 50See id. Along similar lines, another commenter 

said that the increasing ease of electronic interoffice 

communication could allow for circumvention of 

the aggregation requirements. See CL–IATP Nov 13. 51See CL-Occupy the SEC Nov 13. 52See id. 53See FIA on February 6, 2014 (‘‘CL–FIA Feb 6’’) 

and CL–FIA Nov 13. 

2. Commenters’ Views 

a. Comments on the Ownership 

Threshold 

The large majority of comments 

received after the Supplemental Notice 

was issued supported proposed rule 

150.4(b)(2) as it was modified in the 

Supplemental Notice, and said the 

Commission should not adopt proposed 

rule 150.4(b)(3). The commenters said 

that the modifications described in the 

Supplemental Notice would provide for 

a more workable aggregation standard, 

enhance the Commission’s regulatory 

goals, and focus the Commission’s 

limited resources on only those 

disaggregation filings which might 

reasonably warrant additional 

discretionary review.43

Many of the commenters who 

supported the revisions in the 

Supplemental Notice had also provided 

comments on the Proposed Rule to the 

effect that the Commission should 

provide the same disaggregation relief 

for owners of more than 50 percent of 

an owned entity as was proposed to be 

provided for owners of 50 percent or 

less. For example, one commented that 

the Commission should permit majorityowned affiliates to be disaggregated 

regardless of whether the entities are 

required to consolidate financial 

statements, another commented that the 

requirement to submit an application to 

the Commission and await its approval 

would be unworkable in practice and 

not provide any apparent regulatory 

benefit, and a third commented that 

aggregation relief for majority-owned 

affiliates was necessary to avoid 

‘‘serious regulatory costs and 

consequences.’’ 44

Three commenters, each a public 

policy organization, opposed the 

modifications described in the 

Supplemental Notice, saying the 

modifications would impermissibly 

weaken the aggregation regime by 

allowing entities with majority 

ownership not only to qualify for 

disaggregation, but also to do so through 

a simple, immediately effective filing. 

One commenter said that to allow this 

would be fundamentally at odds with 

the statutory mandate of limiting 

speculation and the requirement of 

aggregation based on indirect control of 

an owned entity, because the proposal 

in the Supplemental Notice would 

effectively remove the distinction 

between minority and majority 

ownership by implementing a 

presumption that ownership does not 

entail control over the owned entity’s 

trading activity.45 This commenter 

believes the Commission should 

reinstate a requirement of aggregation of 

positions whenever an ownership 

interest in an owned entity exceeds 10 

percent.46 Another commenter asserted 

that the procedure in the Supplemental 

Notice may be contrary to the CEA, 

because it allows an entity other than 

the Commission (i.e., the entity which 

files an automatically-effective 

compliance notice) to make the 

determination of whether aggregation is 

required.47 The third commenter in this 

group also maintained that relief from 

the aggregation requirement should not 

be available to an owner of more than 

10 percent of a subsidiary, because 

‘‘allowing [position] disaggregation of 

majority-owned subsidiaries would 

violate the clear language’’ of CEA 

section 4a(a)(1) and would allow the 

owner of such subsidiaries to 

circumvent position limits through the 

creation of multiple subsidiaries.48

One commenter opposed to the 

approach in the Supplemental Notice 

argued that it would lead to inconsistent 

results because it calls for a case-bycase, discretionary assessment of 

compliance with standards that test 

separation of trading activity, instead of 

an easy to understand, bright-line test 

premised on ownership percentage. 

This commenter feared that entities 

subject to this discretionary standard 

would be able to attack the 

Commission’s efforts to enforce the 

aggregation requirement as arbitrary and 

capricious.49 Therefore, the Commission 

would have to be vigilant in enforcing 

regulations requiring aggregation by 

unaffiliated individuals acting pursuant 

to an implied agreement.50 For example, 

this commenter asserted that 

unaffiliated investment vehicles could 

serve as a conduit for the trading 

strategies of a sponsor that holds no 

equity interest in the investment 

vehicle, the trading decisions of which 

are nominally outsourced to an 

unaffiliated investment advisor.51 The 

commenter believes that aggregation 

must be applied in such a case, despite 

the apparent absence of an ownership 

relationship between the sponsor and 

the investment vehicle.52

b. Comments Suggesting Additional 

Relief From the Aggregation 

Requirement, or a Different Ownership 

Threshold 

Several commenters believed that the 

proposal should be modified to provide 

relief from the aggregation requirement 

in additional situations. For instance, 

one commenter said that the 

Commission should provide an 

exemption from aggregation for 

transitory ownership or equity interests 

in an owned-entity, such as those 

acquired through foreclosure or a 

similar credit event.53 Other 

commenters said the Commission 


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54See CL–COPE Nov 13. See also CL-Morgan 

Lewis Nov 13 (exemption from aggregation 

requirement should be a non-exclusive safe harbor, 

not excluding the possibility of relief for owners 

and owned entities that do not satisfy every criteria; 

delegate authority under 4a(a)(7) to staffs of the 

Commission, DCMs and SEFs to provide 

disaggregation relief to such firms on a case-by-case 

basis); CL–EPSA Nov 13 (10 percent ownership 

should invoke a rebuttable presumption that can be 

overcome by making the required notice filing in 

good faith). 

55See Managed Funds Association on February 7, 

2014 (‘‘CL–MFA Feb 7’’); CL-Energy Transfer Nov 

13. 

56See CL–ISDA Nov 12; CL–MFA Feb 7; CL– 

AIMA Feb 10. 

57See CSC Sugar, LLC on February 10, 2014; CL– 

IECA Nov 13; CL–PEGCC Nov 12; CL–OTPP Nov 

13; CL–FIA Nov 13; CL–NGSA Nov 13. 

58See CL–FIA Nov 13. 

59See id. 

60See Wilmar International Limited on November 

13, 2015 (‘‘CL-Wilmar Nov 13’’); U.S. Chamber of 

Commerce’s Center for Capital Markets 

Competitiveness on February 10, 2014 (‘‘CLChamber Feb 10’’); National Council of Farmers 

Cooperatives on August 4, 2014 (‘‘CL–NCFC Aug 

4’’); Commodity Markets Council on January 22, 

2015 (‘‘CL–CMC Jan 22’’); Natural Gas Supply 

Association on February 10, 2014 (‘‘CL–NGSA Feb 

10’’); Archer Daniels Midland Company on January 

20, 2015; The Andersons, Inc. on January 15, 2014. 

See also CL–ECOM Nov 13 (Commission should 

apply a facts and circumstances approach that 

permits disaggregation conditioned on 

independence of control of trading decisions). 

61See CL-Wilmar Nov 13 and CL-Chamber Feb 

10. 

62See CL–NCFC Aug 4; CL–CMC Jan 22; CL– 

NGSA Feb 10. 

63See ICE Futures US, Inc. on February 10, 2014 

(‘‘CL–ICE Feb 10’’). See also CL–NGSA Feb 10 

(arguing that aggregation should require findings of 

both ownership and control). 

64See CL–SIFMA AMG Nov 13. 

65See SIFMA AMG on August 1, 2014 (discussing 

practical difficulties such as monitoring the equity 

ownership held by managed funds/accounts, and 

monitoring the commodity derivatives positions 

held by the operating companies in which managed 

funds/accounts hold equity ownership). See also 

CL–SIFMA AMG Nov 13; CL-Wilmar Nov 13. 

66See SIFMA AMG on February 10, 2014 (‘‘CL– 

SIFMA AMG Feb 10’’) (referring to requirement to 

file reports on Form 40 and asserting that the 

Commission’s pre-2011 rulemakings required 

aggregation on the basis of direct ownership in 

accounts, not on the basis of ownership interests in 

third parties who, in turn, owned positions in 

derivatives trading accounts). 

67See CME Group, Inc. on February 10, 2014 

(‘‘CL–CME Feb 10’’). 

68CL–CME Feb 10 (opining that under 

Commission precedent, a 10 percent or more 

ownership or equity interest in an account is an 

indicia of trading control, but precedent does not 

support a requirement for aggregation based on a 10 

percent or more ownership or equity interest in an 

entity). This commenter reasoned that the 

Commission’s use of the term ‘‘account’’ has never 

referred to an owned entity that itself has accounts, 

that the 1979 Aggregation Policy suggests the 

Commission contemplated a definition of 

‘‘account’’ that means no more than a personally 

owned futures trading account, and that the 1999 

Amendments to the aggregation rules were focused 

on directly owned accounts. Id. 

69One of these commenters contended that under 

the Commission’s precedents ‘‘[l]egal affiliation 

[between companies] has been an indicium but not 

necessarily sufficient for position aggregation.’’ See 

Commodity Markets Council on Feb 10, 2014 (‘‘CL– 

CMC Feb 10’’). 

The other commenter asserted that the 

Commission has never specifically required 

Continued 

should establish a process for entities 

that do not squarely meet the criteria for 

disaggregation relief in proposed rule 

150.4(b)(2), allowing them to seek 

disaggregation relief based upon 

particular facts and circumstances 

demonstrating that the owner does not 

control or have shared knowledge of the 

owned entity’s trading activities.54

Other commenters asked for 

clarification of whether relief from 

aggregation on the basis of ownership is 

available to general partners or other 

persons holding interests in various 

forms of partnerships.55

Although commenters generally 

supported the modifications made in 

the Supplemental Notice, and in 

particular the removal of the distinction 

between ownership interests of less than 

50 percent and more than 50 percent, 

several commenters maintained that the 

Commission should not apply a 

threshold of 10 percent for the 

requirement of a notice filing in order to 

claim disaggregation relief. 

Some commenters said that the 

Commission should apply a higher 

threshold below which a claim for 

disaggregation relief would not be 

required. Three commenters advocated 

for the threshold to be moved to 25 

percent.56 Other commenters said the 

threshold should be 50 percent, 

claiming that minority ownership 

generally does not permit control over 

operational aspects of the owned 

entity’s activities, including trading 

strategy and decisions.57 One 

commenter supporting a higher 

threshold remarked that maintaining the 

10 percent threshold will trigger ‘‘false 

positives’’ requiring owners with no 

actual control over an owned-entity’s 

trading activity to file a notice with the 

Commission, which will impose 

significant costs on market participants 

to prepare and file a notice, and on the 

Commission which will have to review 

and administer all of the filed notices.58

In contrast, this commenter said, a 

higher threshold would allow the 

Commission to focus its surveillance 

resources on entities where there is a 

greater likelihood of commonly 

controlled trading activity.59

c. Comments Asserting That 

Aggregation Should Not Be Based on 

Ownership Alone 

Other commenters said that there 

should be no ownership percentage 

threshold for disaggregation relief, but 

rather aggregation should be required 

solely on the basis of actual control of 

trading.60 Certain of these commenters 

asserted that the CEA requires that a 

person control the owned entity’s 

accounts in order to require 

aggregation.61 Other commenters 

focused on the operational challenges of 

aggregation based on ownership, and 

asserted that limiting the aggregation 

requirement to cases where there is 

control would more closely match how 

affiliated companies operate.62 One 

DCM argued that aggregation should be 

required only when there is both 

ownership and control of the owned 

entity, and said that it (i.e., the DCM) 

does not automatically aggregate 

positions of companies with 100 percent 

common ownership, so long as the 

commonly-owned companies operate 

independently from one another in 

terms of decision-making and control of 

trading decisions.63

A commenter representing investment 

managers maintained that the 

Commission should not require passive 

investors in owned entities to aggregate 

the owned entities’ positions when the 

passive investors do not have actual 

control over the owned entities’ 

trading.64 This commenter focused on 

the requirement to file a notice to claim 

relief from aggregation (which it said 

would be burdensome for entities that 

manage a large number of investment 

funds), and suggested instead that the 

criteria in proposed rule 105.4(b)(2)(i) 

be treated as a non-exclusive safe 

harbor, with other relief from 

aggregation being available in various 

circumstances.65 The commenter 

asserted that the CEA requires 

aggregation only when there is actual 

control of the owned entity’s derivatives 

trading, which the Commission has 

traditionally interpreted not to follow 

necessarily from mere corporate control 

of the owned entity.66

A holding company for a number of 

DCMs commented that the Commission 

did not identify any basis or 

justification for the various features of 

the Proposed Rule.67 This commenter 

contended that features of the Proposed 

Rule (regarding the owned entity 

aggregation rules, the IAC exemption, 

and the ‘‘substantially identical trading 

strategies’’ rule) are not in accordance 

with law, are arbitrary and capricious, 

are an unexplained departure from the 

Commission’s administrative precedent, 

and are not more permissive than 

existing aggregation standards.68 Two 

other commenters were also of the 

opinion that the Proposed Rule was not 

supported by the Commission’s 

administrative precedent.69


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aggregation solely on the basis of ownership of 

another legal person. CL–NGSA Feb 10. To support 

its view, this commenter said that the 1979 

Aggregation Policy and the 1999 Amendments 

apply to only trading accounts that are directly or 

personally held or controlled by an individual or 

legal entity, the Commission’s large trader rules 

require aggregation of multiple accounts held by a 

particular person, not the accounts of a person and 

its owned entities, and existing regulation 18.04(b) 

distinguishes between owners of the ‘‘reporting 

trader’’ and the owners of the ‘‘accounts of the 

reporting trader.’’ Id. 

70See CL–CME Feb 10; CL–NGSA Feb 10. One 

commenter asserted that the Commission’s citation 

of prior rules requiring aggregation of owned entity 

positions at a 10 percent ownership level was not 

a sufficient consideration of the statutorily required 

factors. CL–CME Feb 10. 

Another commenter contended that ‘‘CEA section 

4a(a)(1) only allows the Commission to require the 

aggregation of positions on ownership alone when 

those positions are directly owned by a person. The 

positions of another person are only to be 

aggregated when the person has direct or indirect 

control over the trading of another person.’’ CL– 

NGSA Feb 10. 

71See CL–CME Feb 10 (noting that the 

Commission’s proposal to amend regulation 150.3 

to include the separately incorporated affiliates of 

CPOs, CTAs or FCMs as eligible entities for the 

exemption relief of regulation 150.3 (63 FR 38525 

at 38532 n. 27 (July 17, 1998)) states: ‘‘Affiliated 

companies are generally understood to include one 

company that owns, or is owned by, another or 

companies that share a common owner’’). This 

commenter also asserted that the term ‘‘principals’’ 

under existing regulation 3.1(a)(2)(ii) include 

entities that have a direct ownership interest that 

is 10 percent or greater in a lower tier entity, such 

as the parent of a wholly-owned subsidiary. Id. 

From these two provisions, the commenter 

concluded that the corporate parent of a whollyowned CPO would be affiliated with, and a 

principal of, its wholly-owned subsidiary. 

72See CL–CME Feb 10, citing In the Matter of 

Vitol Inc. et al., Docket No. 10–17 (Sept. 14, 2010), 

available at http://www.cftc.gov/ucm/groups/

public/@lrenforcementactions/documents/legal

pleading/enfvitolorder09142010.pdf and In the 

Matter of Citigroup Inc. et al., Docket No. 12–34 

(Sept. 21, 2012), available at http://www.cftc.gov/

ucm/groups/public/@lrenforcementactions/

documents/legalpleading/enfcitigroupcgmlorder092

112.pdf. Another commenter contended that In the 

Matter of Vitol was based on facts that would be 

relevant only if common trading control was 

necessary for aggregating the positions of affiliated 

companies. See CL–NGSA Feb 10. 

73See DB Commodity Services LLC (a whollyowned, indirect subsidiary of Deutsche Bank AG) 

on February 10, 2014 (‘‘CL–DBCS Feb 10’’). 

74See CL-Better Markets Nov 13. 

75See id. (citing CEA section 4a(a)(1)). 

76See Commercial Energy Working Group on 

February 10, 2014 (‘‘CL-Working Group Feb 10’’); 

CL-Working Group Nov 13; CL–CMC Nov 13; CL– 

CMC Feb 10. One of these commenters asserted that 

a common structure for U.S. pension plans is to 

have employees of the sponsor serve as members of 

the investment committee of the plan, which is a 

separate legal entity from and unaffiliated with the 

sponsor. The commenter claimed that these 

employees typically have an investment 

background and may serve in trading-related roles 

for the plan sponsor, and may have knowledge of 

both the plan and the sponsor’s trading activity, 

which may prevent the plan and the sponsor from 

utilizing the proposed exemption from aggregation 

for pension plans. Aggregation would, the 

commenter said, put the fiduciaries of these plans 

in the position of having to account for the trading 

strategies of the sponsor, which may not be in the 

best interests of plan participants. See CL-Working 

Group Nov 13; CL-Working Group Feb 10. 

77Because the Commission is not adopting 

proposed rule 150.4(b)(3), paragraphs (b)(4) to (b)(9) 

of proposed rule 150.4 are renumbered in the final 

rule as paragraphs (b)(3) to (b)(8), respectively. 

Also, as proposed in the Supplemental Notice, the 

Commission is not adopting proposed rule 

150.4(e)(1)(i) which contained a delegation of 

authority referencing proposed rule 150.4(b)(3), and 

the final rule also reflects the deletion of a crossreference to proposed rule 150.4(b)(3)(vii) in rule 

150.4(c)(1). See Supplemental Notice, 80 FR at 

58371. 

78See id. Final rule 150.4(b)(6) (proposed as rule 

(b)(7)) is discussed more fully in section II.F, below. 79The Commission notes in this regard that there 

may have been significant burdens in meeting the 

requirements of proposed rule 150.4(b)(3) even 

where there is no control of the trading of the 

owned entity, as was suggested by the Center for 

Capital Markets Competitiveness of the U.S. 

Chamber of Commerce, SIFMA AMG and other 

commenters on the Proposed Rule. See 

Supplemental Notice, 80 FR at 58371. 

80For purposes of aggregation, the Commission 

continues to believe, as stated in the Proposed Rule, 

Commenters asserted that section 

4a(a)(1) of the CEA provides no basis for 

requiring aggregation of positions held 

by another person in the absence of 

control of such other person.70 One of 

these commenters also stated that 

existing regulation 150.4(b) generally 

exempts a commodity pool’s 

participants with an ownership interest 

of 10 percent or greater from aggregating 

the positions held by the pool.71 Finally, 

commenters contended that two of the 

Commission’s enforcement cases 

indicate that the Commission has 

viewed aggregation as being required 

only where there is common trading 

control.72

d. Other Comments Related to 

Aggregation 

The Commission received conflicting 

comments about passive index-tracking 

commodity pools. One commenter 

asserted that the operators of such pools 

do not have discretion to react to market 

movements and, thus, do not ‘‘control’’ 

trading in the usual meaning of that 

word, so the positions of such pools 

should not be aggregated with other 

pools operated by the same operator.73

Another commenter said the 

Commission should mandate 

aggregation of all positions of a group or 

class of traders such as operators of 

passive index-tracking commodity 

pools, because the Commission should 

focus on excessive concentration of 

positions and potential market 

manipulation.74 This commenter noted 

that the CEA includes language 

extending the CFTC’s aggregation 

powers to cover ‘‘any group or class of 

traders.’’ 75

Two commenters suggested that the 

rule provide an explicit exemption from 

aggregation for pension plans, because 

the proposed rule creates a complicated 

and potentially unavailable route to 

relief to entities that are required to 

operate only in the best interests of plan 

beneficiaries and thus cannot be used to 

further the interests of the pension 

plan’s sponsor.76

3. Final Rule 

The Commission is adopting rule 

150.4(a)(1) as it was stated in the 

Proposed Rule and reiterated in the 

Supplemental Notice. This rule sets 

forth the requirements to aggregate 

positions on the basis of ownership or 

control, or when two or more persons 

act together under an express or implied 

agreement. The Commission is also 

adopting rule 150.4(b)(2) substantially 

as it was proposed in the Supplemental 

Notice (with certain modifications 

discussed below) but, as stated in the 

Supplemental Notice, it is not adopting 

proposed rule 150.4(b)(3).77 The 

Commission is also adopting the 

conforming change in rule 150.4(b)(6) 

from the Supplemental Notice, to delete 

a cap of 50 percent on the ownership or 

equity interest for broker-dealers to 

disaggregate.78 The Commission is 

persuaded by the commenters that rule 

150.4(b)(2) should apply to all persons 

with an ownership or equity interest in 

an owned entity of 10 percent or greater 

(i.e., an interest of up to and including 

100 percent) in the same manner. 

a. Ownership Threshold for Aggregation 

The Commission continues to believe 

that, as stated in the Supplemental 

Notice, the overall purpose of the 

position limits regime (to diminish the 

burden of excessive speculation which 

may cause unwarranted changes in 

commodity prices) would be better 

served by focusing the aggregation 

requirement on situations where the 

owner is, in view of the circumstances, 

actually able to control the trading of 

the owned entity.79 The Commission 

reasons that the ability to cause 

unwarranted changes in the price of a 

commodity derivatives contract would 

result from the owner’s control of the 

owned entity’s trading activity. 

Rule 150.4(b)(2) will 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 will generally be 

required to aggregate the account or 

position.80 The Commission has found, 


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that contingent ownership rights, such as an equity 

call option, would not constitute an ownership or 

equity interest. See Proposed Rule at 68958. 

81See CL–FIA Nov 13. 

82As discussed below, the Commission has 

instructed its staff to conduct ongoing surveillance 

and monitoring of disaggregation filings and related 

information for red flags. 

83Under the rule adopted 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 rule 150.4(a)(2). The exemptions in 

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)(4)). 

84See rule 150.4(c), discussed in section II.C., 

below. 

85See CL-Better Markets Nov 13; CL-Occupy the 

SEC Nov 13; CL–IATP Nov 13. 

86See Supplemental Notice, 80 FR at 58371. 

87See rule 150.4(b)(2)(i), discussed in section 

II.B., below. 88See Proposed Rule, 78 FR at 68961, referring to 

existing regulation 150.3(a)(4) (to be replaced by 

rule 150.4(b)(4)). 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. 

89See MidAmerican Energy Holdings Company 

on February 7, 2014 (‘‘CL-MidAmerican Feb 7’’). 

90See Supplemental Notice, 80 FR at 58369–70. 

over the decades that the 10 percent 

threshold has been in effect, that this is 

an appropriate level at which 

aggregation should be required, and no 

change to this threshold was proposed. 

The Commission considered the 

comments that suggested different 

ownership thresholds (e.g., 25 percent 

or 50 percent) for the aggregation 

requirement. In contrast to the 

satisfactory experience with the 10 

percent threshold, the Commission 

believes that none of the commenters 

presented a compelling analysis to 

justify a different threshold. That is, 

while it is undoubtedly true that 

application of different ownership 

thresholds would result in differences 

in which persons would be required to 

aggregate or seek exemptions from 

aggregation, the commenters did not 

provide a persuasive explanation of how 

application of a 25 percent or 50 percent 

ownership threshold would more 

appropriately further the purposes of 

the position limit regime than the 10 

percent threshold which has been 

applied to date. 

For example, one commenter posited 

that maintaining the 10 percent 

threshold would require owners to file 

unnecessary notices seeking exemptions 

from aggregation, imposing a burden on 

both market participants and the 

Commission.81 However, the 

Commission believes that preparation of 

the required notices (and the 

Commission’s review of them) will not 

impose undue burdens, and the notices 

will be helpful to the Commission in 

monitoring the use of exemptions from 

aggregation.82 So while raising the 

threshold would presumably decrease 

the number of notices that are filed, it 

is not clear that the benefit would be 

significant since the filing burden is 

minimal; at the same time, however, the 

amount of information available to the 

Commission for use in monitoring and 

enforcement would be reduced, a 

potential harm. Because of this 

uncertainty, the Commission cannot 

conclude that a 25 percent, 50 percent 

or other threshold would be 

significantly better than the 10 percent 

threshold which has been satisfactorily 

applied to date, and the Commission 

has determined to leave the 10 percent 

threshold in place. 

After considering the comments on 

the proposed procedure in rule 

150.4(b)(2) for a notice filing to permit 

a person with an ownership or an equity 

interest in an owned entity of 10 percent 

or greater to disaggregate the positions 

of the owned entity in specified 

circumstances, the Commission has 

determined to adopt this proposal.83

The notice filing must demonstrate 

compliance with the conditions set forth 

in rule 150.4(b)(2), which are discussed 

below. Similar to other exemptions from 

aggregation, the notice filing will be 

effective upon submission to the 

Commission, but the Commission is 

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 is 

obligated to amend the notice filing in 

the event of a material change to the 

circumstances described in the filing.84

The Commission notes that 

commenters raised valid concerns about 

permitting disaggregation following a 

notice filing that is effective upon 

submission.85 The Commission has 

instructed its staff to conduct ongoing 

surveillance and monitoring of 

disaggregation filings and related 

information for red flags which could 

include, but would not be limited to, the 

creation of multiple subsidiaries, filings 

that are only superficially complete, and 

patterns of trading that suggest 

coordination after a filing has been 

made. The Commission is sensitive to 

the potential for circumvention of 

position limits through the use of 

multiple subsidiaries, but it continues to 

believe, as stated in the Supplemental 

Notice, that the criteria in rule 

150.4(b)(2)(i), which must be satisfied in 

order to disaggregate, will appropriately 

indicate whether an owner has control 

of or knowledge of the trading activity 

of the owned entity.86 The 

disaggregation criteria require that the 

two entities not have knowledge of each 

other’s trading and, moreover, have and 

enforce written procedures to preclude 

such knowledge.87 And, in fact, as noted 

in the Proposed Rule, the Commission 

has applied, and expects to continue to 

apply, certain of the same conditions in 

connection with the IAC exemption to 

ensure independence of trading between 

an eligible entity and an affiliated 

independent account controller.88

If the disaggregation criteria are 

satisfied, the Commission believes that 

disaggregation may be permitted 

without weakening the aggregation 

regime, even if the owner has a greater 

than 50 percent ownership or equity 

interest in the owned entity. Even in the 

case of majority ownership, if the 

disaggregation criteria are satisfied, the 

ability of an owner and the owned 

entity to act together to engage in 

excessive speculation or to cause 

unwarranted price changes should not 

differ significantly from that of two 

separate individuals. The Commission 

reaches this conclusion based in part on 

commenters’ descriptions of relevant 

corporate structures. For example, one 

commenter described instances where 

an entity has a 100 percent ownership 

interest in another entity, yet does not 

control day-to-day business activities of 

the owned entity.89 In this situation the 

owned entity would not have 

knowledge of the activities of other 

entities owned by the same owner, nor 

would it raise the heightened concerns, 

triggered when one entity both owns 

and controls trading of another entity, 

that the owner would necessarily act in 

a coordinated manner with other owned 

entities. 

As explained in the Supplemental 

Notice, the Commission believes it 

would be inappropriate to disallow the 

possibility of a notice filing to 

disaggregate the positions of majorityowned subsidiaries, because without 

this possibility of relief, corporate 

groups may be required to establish 

procedures to monitor and coordinate 

trading activities across disparate 

owned entities, which could have 

unpredictable consequences.90 The 

Commission recognizes that these 

consequences could include not only 

the cost of establishing these 

procedures, but also the impairment of 

corporate structures which were 

established to ensure that the various 


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91The Commission noted in the Supplemental 

Notice that the disaggregation criteria in rule 

150.4(b)(2)(i) should be relatively familiar to 

corporate groups, because they are in line with 

prudent corporate practices that are maintained for 

longstanding, well-accepted reasons. See id. The 

Commission also notes that since the aggregation 

rules may be a precedent for aggregation rules 

enforced by DCMs and SEFs, it is even more 

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. See Proposed Rule, 78 FR at 68596, 

n. 103. The Commission believes that by 

implementing an approach to aggregation that is in 

keeping with longstanding corporate practices, rule 

150.4(b)(2) promotes the goal of setting out ‘‘bright 

line’’ rules that are relatively easy to apply while 

not being susceptible to circumvention. 

92See Supplemental Notice, 80 FR at 58371. 

93 7 U.S.C. 6a(a)(1), cited in Proposed Rule, 78 FR 

at 68956, and Supplemental Notice, 80 FR 58366. 

94See Proposed Rule, 78 FR at 68956. 

95See 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. 

96See H.R. Rep. No. 624, 99th Cong., 2d Sess. 

(1986) at page 43. The Report noted that: 

During the subcommittee hearings on 

reauthorization, several witnesses expressed 

dissatisfaction with the manner in which certain 

market positions are aggregated for purposes of 

determining compliance with speculative limits 

fixed under Section 4a of the Act. The witnesses 

suggested that, in some instances, aggregation of 

positions based on ownership without actual 

control unnecessarily restricts a trader’s use of the 

futures and options markets. In this connection, 

concern was expressed about the application of 

speculative limits to the market positions of certain 

commodity pools and pension funds using multiple 

trading managers who trade independently of each 

other. The Committee does not take a position on 

the merits of the claims of the witnesses. Id. 

97The Managed Futures Trade Association 

petition requested that the Commission amend the 

aggregation standard for exchange-set speculative 

position limits in regulation 1.61(g) (now regulation 

150.5(g)), by adding a proviso to exclude the 

separate accounts of a commodity pool where 

trading in those accounts is directed by unaffiliated 

CTAs acting independently. See Exemption From 

Speculative Position Limits for Positions Which 

Have a Common Owner but Which Are 

Independently Controlled; Proposed Rule, 53 FR 

13290, 13291–92 (Apr. 22, 1988). The petition 

argued the ownership standard, as applied to 

‘‘multiple-advisor commodity pools, is unfair and 

unrealistic’’ because while the commodity pool may 

own the positions in the separate accounts, the CPO 

does not control trading of those positions (the 

unaffiliated commodity trading advisor (‘‘CTA’’) 

does) and therefore the pool’s ownership of the 

positions will not result in unwarranted price 

fluctuations. See id. at 13292. 

The petition from the Chicago Board of Trade 

(which is now a part of CME Group, Inc.) sought 

to revise the aggregation standard so as not to 

require aggregation based solely on ownership 

without control. See id. 

98See id. In response to the petitions, however, 

the Commission proposed the IAC exemption, 

which provides ‘‘an additional exemption from 

speculative position limits for positions of 

commodity pools which are traded in separate 

accounts by unaffiliated account controllers acting 

independently.’’ Id. 

owned entities engage in business 

independently. This independence may 

serve important purposes which could 

be lost if the aggregation requirement 

were imposed too widely. The 

Commission does not intend that the 

aggregation requirement interfere with 

existing corporate structures and 

procedures adopted to ensure the 

independence of owned entities.91

Adoption of rule 150.4(b)(2) is in 

accordance with the Commission’s 

authority under CEA section 4a(a)(7) to 

provide relief from the position limits 

regime. The notice filing requirement in 

the rule will appropriately implement 

the CEA. The 10 percent threshold 

historically applied by the Commission 

continues to have importance, because 

it demarcates the level at which the 

notice filing and the procedures 

underlying the notice are required. 

Relief under rule 150.4(b)(2) will not be 

automatic, but rather will require a 

certification (provided in the notice 

under rule 150.4(c)) that procedures to 

ensure independence are in place. 

Furthermore, as the Commission 

noted in the Supplemental Notice, 

satisfaction of the criteria in rule 

150.4(b)(2) would not foreclose the 

possibility that positions of owners and 

owned entities would have to be 

aggregated.92 For example, aggregation 

is and would continue to be required 

under rule 150.4(a)(1) if two or more 

persons act pursuant to an express or 

implied agreement; and this aggregation 

requirement would apply whether the 

two or more persons are an owner and 

owned entity(ies) that meet the 

conditions in proposed rule 150.4(b)(2), 

or are unaffiliated individuals. 

b. Ownership Is a Valid Basis for 

Aggregation 

Regarding those commenters who said 

that ownership of an entity should not 

be a basis for aggregation of that entity’s 

positions, the Commission continues to 

interpret section 4a(a)(1) of the CEA, as 

stated in the Proposed Rule and 

reiterated in the Supplemental Notice, 

to provide for the general aggregation 

standard with regard to position limits, 

and specifically supports aggregation on 

the basis of ownership, because it 

provides that 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.93

The Commission explained in the 

Proposed Rule that this interpretation is 

supported by Congressional direction 

and Commission precedent from as 

early as 1957 and continued through 

1999.94

For example, in 1968, Congress 

amended the aggregation standard in 

CEA section 4a to include positions 

‘‘held by’’ one trader for another,95

supporting the view that an owner 

should aggregate the positions held by 

an owned entity (because the owned 

entity is holding the positions for the 

owner). During the Commission’s 1986 

reauthorization, witnesses at 

Congressional hearings suggested that 

‘‘aggregation of positions based on 

ownership without actual control 

unnecessarily restricts a trader’s use of 

the futures and options markets,’’ but 

the Congressional committee did not 

recommend any changes to the statute 

based on these suggestions.96

In 1988, the Commission reviewed 

petitions by the Managed Futures Trade 

Association and the Chicago Board of 

Trade which argued against aggregation 

based only on ownership.97 In response 

to the petition, however, the 

Commission stated that: 

Both ownership and control have long 

been included as the appropriate aggregation 

criteria in the Act and Commission 

regulations. Generally, inclusion of both 

criteria has resulted in a bright-line test for 

aggregating positions. And as noted above, 

although the factual circumstances 

surrounding the control of accounts and 

positions may vary, ownership generally is 

clear. 

. . . In the absence of an ownership 

criterion in the aggregation standard, each 

potential speculative position limit violation 

would have to be analyzed with regard to the 

individual circumstances surrounding the 

degree of trading control of the positions in 

question. This would greatly increase 

uncertainty.98


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99See Administrative Determination 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(a) 

(‘‘Multiple Accounts’’) stated that 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 existing regulation 

150.4 with the existing position limit provisions in 

part 150. See 1999 Amendments. The Commission’s 

part 151 rulemaking also incorporated the 

aggregation provisions in vacated regulation 151.7 

along with the remaining position limit provisions 

in part 151. See 76 FR 71626, Nov. 18, 2011. 

100 17 CFR 1.3(y). This provision has been in 

existing 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). 

101See 1999 Amendments, 64 FR at 24044 (‘‘[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. The 1999 

Amendments’ reference to the Commission’s largetrader reporting system, 64 FR at 24043, is not 

related to the aggregation rules for the position 

limits regime. Rather, the 1999 Amendments 

included an explanation of situations in which 

reporting could be required based on both control 

and ownership. 1999 Amendments, 64 FR at 24043 

and n. 26. (the ‘‘routine large trader reporting 

system is set up so that it does not double count 

positions which may be controlled by one and 

traded for the beneficial ownership of another. In 

such circumstances, although the routine reporting 

system will aggregate the positions reported by 

FCMs using only the control criterion, the staff may 

determine that certain accounts or positions should 

also be aggregated using the ownership criterion or 

may by special call receive reports directly from a 

trader.’’) 

102See footnote 91, above. 

103See Supplemental Notice, 80 FR at 58373. 

104 In fact, the word ‘‘account’’ does not even 

appear in the statute. As noted above, section 

4a(a)(1) of the CEA provides that 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. 7 U.S.C. 6a(a)(1). 

105See Supplemental Notice, 80 FR at 58373. 

106See CL–CME Nov 13 and CL–NGSA Nov 13. 

107See Supplemental Notice, 80 FR at 58373. 

108See, 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). 

Even earlier 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.99 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.100

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 

interpret section 4a to require 

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.101

Moreover, an ownership standard 

establishes a bright-line test that 

provides certainty to market 

participants and the Commission.102

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 

were read to require aggregation based 

only on control, market participants 

may be able to use an ownership 

interest to directly or indirectly 

influence the account or position and 

thereby circumvent the aggregation 

requirement. 

In the Supplemental Notice, the 

Commission responded to commenters’ 

assertions that the Proposed Rule was 

not in accordance with the 

Commission’s statutory authority or 

precedents.103 In brief, the Commission 

explained that the aggregation 

requirement in CEA section 4a is not 

phrased in terms of whether the owner 

holds an interest in a trading account.104

The Commission also explained why its 

enforcement history does not contradict 

the Commission’s traditional view of 

aggregation of owned entity positions as 

being required on the basis of either 

control or ownership.105 The relevant 

commenters did not discuss these 

points in the comments they submitted 

on the Supplemental Notice,106 and the 

Commission considers that the 

discussion of these matters in the 

Supplemental Notice explains how the 

final rule is in accordance with law and 

the Commission’s precedents.107

c. Other Considerations Relevant to the 

Proposed Rule 

The Commission does not believe, as 

suggested by some commenters, that the 

aggregation requirement in rule 

150.4(a)(1) would lead to significantly 

more information sharing or 

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 entities that 

hold positions in excess of the limits, 

which the Commission expects to be 

relatively small in comparison to all 

entities that are active in the relevant 

markets.108 Thus, the Commission 

continues to believe that the final rule 

will not result in a significantly 

increased level of information sharing 

that would increase coordinated 

speculative trading. The Commission 

notes that rule 150.4(b) sets out various 

aggregation exemptions, lessening the 

need to share information regarding 

speculative trading to ensure 

compliance with position limits. 

The Commission has also considered 

that relief from any rule requiring the 

aggregation of positions held by separate 

entities is only necessary where the 

entities would be below the relevant 

limits on an individual basis, but above 

a limit when aggregated. Thus, as the 

Commission suggested in the Proposed 

Rule, if a group of affiliated entities can 

take steps to maintain an aggregate 


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109See Proposed Rule, 78 FR at 68958. 

110The 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. 

111An even more cautious approach would be for 

the holding company to limit the overall allocation 

to the subsidiaries to less than 100 percent of the 

position limit. For example, a holding company 

with three subsidiaries may assign each subsidiary 

an internal limit equal to 30 percent 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 percent 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 

percent 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. 

112See 17 CFR part 18, Appendix A. 

113The Proposed Rule noted that the criteria 

would apply to the person filing the notice as well 

as the owned entity. See Proposed Rule, 78 FR at 

68961. In addition, the Proposed Rule noted that 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 under 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. See id. 

114See id., citing 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); 1999 Amendments, 64 FR at 24044 

(intent in issuing final aggregation rule ‘‘merely to 

codify the 1979 Aggregation Policy, including the 

continued efficacy of the [1992] interpretative 

letter’’). 

position that does not exceed any limit, 

then the group will not have to seek 

disaggregation relief.109

In other words, the Commission 

continues to believe that 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.110 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.111 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. 

The Commission also considered 

whether aggregation of positions is 

unnecessary because information about 

ownership and control is available to 

the Commission through reports on 

Commission Form 40.112 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. 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. 

d. Consideration of Alternatives 

Suggested by Commenters 

Regarding the requests for specific 

exemptions or other special treatment 

for various types of entities or 

situations, such as investment 

companies, pension plans, passive 

index-tracking commodity pools, and 

cases of transitory ownership, the 

Commission is not persuaded that any 

further relief for such entities (i.e., 

beyond the relief already provided in 

the final rule) would justify the 

complexity of applying the new rules 

that would be necessary for such 

specific treatment, which would likely 

include definitional rules to set out the 

scope of entities that qualify for the 

special treatment. For example, the 

Commission believes that distinguishing 

‘‘transitory’’ ownership from other 

forms of ownership would be more 

complicated than completing the notice 

required to obtain relief, and in such 

situations it is reasonable to expect that 

the notice filing would be made on a 

summary basis appropriate to the 

transitory situation. 

The Commission reached a similar 

conclusion regarding the suggestions for 

different types of filings in various 

situations. Again, the Commission 

believes that the filing required by rule 

150.4(c) is relatively simple because it 

requires only a description of the 

relevant circumstances that warrant 

disaggregation, and a statement 

certifying that the conditions set forth in 

the applicable aggregation exemption 

provision have been met. Therefore, the 

complexity of determining which filing 

to provide in various situations would 

be greater than that involved in 

completing the required filing. 

As for the commenters that suggested 

certain categories of persons (such as 

passive investors) should be exempt 

from the aggregation requirement 

without making any filing at all, the 

Commission concluded that this 

approach would put at risk the 

satisfactory experience under the 

existing regulation, under which 

aggregation is required without 

exemption. For this reason, the 

Commission did not propose to provide 

categorical exemptions from the 

aggregation requirement. As explained 

above, the Commission believes it is 

important that its staff be able to 

conduct ongoing surveillance and 

monitoring of disaggregation filings and 

related information for red flags. If 

greater than 10 percent owners were 

permitted to avoid the aggregation 

requirement without making any filing, 

there could be a greater potential for 

circumvention of position limits. 

Last, the Commission emphasizes that 

the categories of relief from the 

aggregation requirement set forth in the 

final rule do not limit the Commission’s 

existing authority under section 4a(a)(7) 

of the CEA to grant exemptions from the 

aggregation requirement on a case-bycase basis. 

B. Criteria for Aggregation Relief in Rule 

150.4(b)(2)(i) 

1. Proposed Approach 

The proposed criteria to claim relief 

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.113 The 

Proposed Rule grouped these criteria 

into five paragraphs in proposed rule 

150.4(b)(2)(i). The Commission stated its 

intent that these criteria would be 

interpreted and applied in accordance 

with the Commission’s past practices in 

this regard.114 In accordance with these 

precedents, the Commission would not 

expect that the criteria would impose 

requirements beyond a reasonable, 

plain-language interpretation of the 


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115See Proposed Rule, 78 FR at 68961. 

116As noted in the Proposed Rule, 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. See id. 

117As explained in the Proposed Rule, proposed 

paragraph (A) was along the lines suggested by 

commenters on the proposed amendments to part 

151. These commenters had said 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. 

Also, 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 does not constitute a 

violation of the information sharing restriction. And 

a commenter had said 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. See id. 

118See id. See also existing regulation150.3(a)(4). 

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. 

119See, e.g., 1979 Aggregation Policy, 44 FR at 

33840–1 (futures commission merchant (FCM) 

‘‘deemed to control’’ trading of customer accounts 

in trading program where FCM gives 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). 

120Commenters on the proposed amendments to 

part 151 had said that this requirement should not 

prevent the use of third party ‘‘off-the-shelf’’ 

execution algorithms, 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, and should apply only to 

systems that direct trading decisions, but not trade 

capture, trade risk or trade facilitation systems. See 

Proposed Rule, 78 FR at 68962. 

121Compare 1979 Aggregation Policy, 44 FR 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.’’ 

122See Proposed Rule, 78 FR at 68962. 

123Commenters on the proposed amendments to 

part 151 said this criteria should not prohibit 

sharing of board or advisory committee members 

who do not influence trading decisions, sharing of 

Continued 

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. 

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 noted its preliminary belief 

that where an entity has an ownership 

interest in another entity and neither 

entity shares trading information, such 

entities demonstrate independence.115

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.116 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 the Proposed Rule, the 

Commission clarified 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.117

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 

Proposed Rule, 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 

IAC.118 Similar to the IAC exemption, 

proposed rule 150.4(b)(2) would permit 

disaggregation in certain circumstances 

where there is independence of trading 

between two entities. Thus, the 

Commission proposed these conditions, 

which were already applicable and 

working well in the IAC context, and 

which were expected to strengthen the 

independence between the two entities 

for the owned entity exemption. 

The Commission proposed that the 

phrase ‘‘separately developed and 

independent trading systems’’ be 

interpreted in accordance with the 

Commission’s prior practices in this 

regard.119 The Commission stated that it 

generally would 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.120 Rather, 

the concern driving the Commission’s 

proposal was 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.121

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. In the 

Proposed Rule, the Commission stated 

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.122 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 Proposed Rule noted the 

Commission’s concern that shared 

employees with control of trading 

decisions may undermine the 

independence of trading between 

entities.123 Regarding the sharing of 


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research personnel, or sharing for training, 

operational or compliance purposes, so long as 

trading of the person and the owned entity remains 

independent. See id. 

124As noted in the Proposed Rule, the condition 

barring the sharing of employees that control the 

owned entity’s trading decisions would include a 

prohibition on sharing of attorneys, accountants, 

risk managers, compliance and other mid-and backoffice personnel, to the extent such employees 

participate in control of the trading decisions of the 

person or the owned entity. See id. 

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

was 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. 

126The Commission remains concerned, as stated 

in the Proposed Rule 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. See Proposed Rule, 78 FR at 

68962. 

127See id. 

128See CL-Sempra Nov 13 and CL–EEI Nov 13, 

respectively. A third commenter thought the criteria 

are reasonable and practicable, but cautioned that 

it is difficult to eliminate knowledge sharing 

between related business entities, citing Paul 

Volcker describing as naı ̈ve the view that ‘‘Chinese 

Walls can remain impermeable against the 

pressures to seek maximum profit and personal 

remuneration.’’ See Chris Barnard on November 12, 

2015. 

129See CL-Wilmar Nov 13. 

130See CL–SIFMA AMG Nov 13; CL–MFA Nov 

12; CL–AIMA Feb 10. One of these commenters said 

that, as a general matter, it can be very difficult for 

owners to obtain information about owned entities, 

e.g., when the owned entity is in a different 

country. CL–MFA Nov 12. 

131See Coalition of Physical Energy Companies 

on February 10, 2014 (‘‘CL–COPE Feb 10’’). 

132See Institute for Agriculture and Trade Policy 

on February 10, 2014 (‘‘CL–IATP Feb 10’’). 

133See CL–IECA Nov 13. See also CL–CME Nov 

13 (criteria should focus on ensuring that the 

entities do not share knowledge of or control over 

trading, which would not be implicated merely 

because they trade pursuant to commonlydeveloped trading systems). 

134This commenter also said that, at a minimum, 

the Commission should distinguish between frontend systems (used for trade capture and trade 

booking) and back-end systems (used for risk 

management and trade reporting). See CL–IECA 

Nov 13. 

Another commenter described ‘‘trade capture 

systems’’ as distinct from trading strategies. This 

commenter said trade capture systems are used to 

track positions on an enterprise-wide basis across 

multiple affiliates for risk management, 

recordkeeping and other business purposes, but 

these systems do not direct trading and use of a 

shared trade capture system does not mean that the 

entities have adopted or employed identical, or 

even similar, trading strategies. See CL–EEI Nov 13. 

A third commenter referred to trade capture, 

trade execution, and related report-generation 

systems for the confirmation, booking and 

accounting of orders and for any other mid- and 

back-office functions. This commenter asserted that 

since such systems merely record, process, and 

facilitate reports of trading, but do not establish 

attorneys, accountants, risk managers, 

compliance and other mid- and backoffice personnel, the Commission 

proposed 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.124 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.125

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 was 

intended to 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.126 The 

Commission proposed 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.127 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. 

2. Commenters’ Views 

As a general matter, some commenters 

said that the disaggregation criteria in 

the Proposed Rule were appropriately 

stated. One described the disaggregation 

criteria as a balanced and effective 

approach that gets to the heart of the 

Commission’s aggregation policy, while 

another said the criteria provide 

appropriate indications of whether an 

owner has knowledge or control of the 

trading activity of an owned entity.128

On the other hand, another commenter 

believed that the criteria are vague and 

unclear, especially for global enterprises 

which are active in more than one 

aspect of a market (e.g., both production 

and trading activities).129

Set forth below is a brief discussion 

of the comments on each aspect of the 

proposed disaggregation criteria. 

a. Proposed Rule 150.4(b)(2)(i)(A)—No 

Shared Knowledge of Trading Decisions 

Commenters said that passive 

investors in an owned entity should be 

required to certify only that they have 

no knowledge of the owned entity’s 

trading, not whether the owned entity 

has knowledge of the trading of the 

passive investors (i.e., the owners), 

since passive investors would not have 

insight into the knowledge of the owned 

entity.130 One commenter asked that the 

Commission clarify that the gain of 

information as a counterparty to a 

transaction would not in itself violate 

this criterion regardless of how the 

information is transmitted.131

Another commenter questioned how 

this criterion would be applied to 

trading decisions triggered by an 

algorithm over which human 

intervention is rarely exercised. For 

example, the commenter asserted that 

the use of off-the-shelf third party 

algorithms by entities owned by a single 

owner could enable a de facto 

coordination without intentional 

indirect coordination.132

b. Proposed Rule 150.4(b)(2)(i)(B)—Have 

Separately Developed and Independent 

Trading Systems 

Several commenters suggested that 

the Commission modify this paragraph 

so that it refers to ‘‘trading strategies’’ 

instead of ‘‘trading systems.’’ That is, 

they suggested that the paragraph 

require that the owner and the owned 

entity ‘‘Trade pursuant to separately 

developed and independent trading 

strategies.’’ One commenter was of the 

view that because proposed rule 

150.4(b)(2)(i)(A) would require that the 

owner and the owned entity not have 

shared knowledge of trading decisions, 

there is no need for this paragraph to 

require separate ‘‘trading systems’’ 

when the purpose of this rule should be 

to prohibit use of ‘‘trading strategies’’ 

that were developed in coordination.133

The commenter believed that this 

change would allow the owner and the 

owned entity to utilize a single shared 

system for trading, which would be 

appropriate and could enhance risk 

management so long as the owner and 

the owned entity can demonstrate that 

the condition of no shared knowledge of 

trading decisions is met.134


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parameters (e.g., algorithms) for trading, their use 

by multiple entities should be permitted under this 

criterion so long as they do not enable coordinated 

trading. See CL-Energy Transfer Nov 13. 

135See CL–CME Nov 13; CL–FIA Nov 13; CL–FIA 

Feb 6. 

136This commenter said it would be appropriate 

for trading strategies of separate investment 

vehicles to be executed via a single execution desk, 

as long as the vehicles’ portfolio managers were not 

coordinating placement of the trades, in order to 

achieve risk management goals such as to avoid 

cross and wash trading or the submission of an 

excessive numbers of orders, to avoid having 

vehicles bid against each other, to monitor other 

trading thresholds, and to achieve fair terms of 

execution and aggregation. See CL–AIMA Nov 12. 

137See Proposed Rule, 78 FR at 68962. 

138See CL–SIFMA AMG Nov 13; CL–AIMA Feb 

10; CL-Energy Transfer Nov 13. 

139See Occupy the SEC on August 7, 2014 (‘‘CLOccupy the SEC Aug 7’’). 

140See FIA on July 31, 2014 (‘‘CL–FIA July 31’’) 

and CL–FIA Nov 13. 141See id. 142See CL-Energy Transfer Nov 13. The second 

sentence reads ‘‘Such procedures must include 

document routing and other procedures or security 

arrangements, including separate physical 

locations, which would maintain the independence 

of their activities.’’ The commenter said that if the 

second sentence is retained, the Commission 

should provide guidance that the routing of 

documents to senior management or risk 

management personnel, and the routing of 

documents that show aggregate, non-granular, or 

stale trading positions, may be acceptable so long 

as such routing does not allow coordinated trading. 

143See id. 

144See Better Markets, Inc. on February 10, 2014 

(‘‘CL-Better Markets Feb 10’’). 

145See id. 

146See CL–COPE Feb 10. 

147See CL–MFA Feb 7, referring to Proposed 

Rule, 78 FR at 68962. 

148See CL–AIMA Feb 10, citing Proposed Rule, 

78 FR at 68962 (‘‘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.’’). See also CL–ISDA Nov 12; CL–SIFMA 

AMG Nov 13; CL–PEGCC Nov 12; CL–CME Nov 13. 

149See CL–ISDA Nov 12; CL–SIFMA AMG Nov 

13; CL–PEGCC Nov 12; CL–CME Nov 13; CL–AIMA 

Feb 10. 

Other commenters remarked that a 

change in the rule text from ‘‘trading 

systems’’ to ‘‘trading strategies’’ would 

allow corporate groups to take 

advantage of economies of scale by 

having one trading system developed for 

multiple companies in the group, and 

promote efficient trading and risk 

management practices through the 

development of trading technologies 

that are unrelated to trading strategy.135

A commenter representing investment 

managers said that disaggregation relief 

should be available if the original 

investment decisions are made 

independently, even if trades are 

subsequently executed and risk 

managed on an aggregated basis using a 

single system.136

Commenters referred to the 

Commission’s statement in the Proposed 

Rule that it generally would 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.137

The commenters asked that this 

guidance be reiterated in the final rule 

and be extended beyond off-the-shelf 

systems or other technologies 

‘‘developed by’’ third parties, to include 

any in-house software or custom 

modules added to third-party software, 

so long as these internal systems are not 

used to share trading information with 

day-day trading personnel or otherwise 

permit coordinated trading.138

On the other hand, another 

commenter said that the application of 

this criterion, which implicitly assumes 

that market participants will self-report 

common trading strategies, fails to 

recognize that the participants may be 

reluctant to report collusive strategies, 

and therefore DCMs and SEFs should be 

required to analyze market data for 

trading strategy correlations.139

c. Proposed Rule 150.4(b)(2)(i)(C)—Have 

Written Procedures To Maintain 

Independence, Including Separate 

Physical Locations 

A commenter said that the 

requirement to meet this criteria (to 

have written procedures restricting 

access to trading information) should 

apply only to the owner claiming the 

exemption from aggregation, and not the 

owned entity, because depending on the 

extent of an owner’s corporate control 

over an owned entity, the owner may 

not be in a position to compel the 

owned entity to establish the written 

procedures.140 This commenter believes 

that so long as the owner has and 

enforces written procedures that 

preclude the owner from sharing trading 

information with, and receiving trading 

information from, the owned entity, 

then each entity will not have access to 

the information of the other.141

Another commenter suggested that 

the second sentence of this provision 

should be deleted because, this 

commenter believes, it is subsumed by 

the first sentence and such prescriptive 

criteria are unnecessary in the context of 

a physical commodity firm as opposed 

to an IAC.142 The commenter also asked 

that the Commission clarify that the 

requirement of ‘‘separate physical 

locations’’ does not require physically 

separate buildings, but rather requires 

only restricted access prohibiting 

personnel from entering the affiliated 

company without permission or signingin or, if on the derivatives trading floors, 

an escort.143

On the other hand, another 

commenter said that this criterion 

should be strengthened to provide 

realistic guidelines for meaningful 

separations of location and information, 

because the statute requires an entity to 

cease trading commodity derivatives in 

multiple divisions separated by ‘‘mere 

‘Chinese walls’ ’’ and it is not within the 

discretion of the Commission to waive 

this requirement.144 This commenter 

cited a research paper which asserted 

‘‘that in important contexts Chinese 

walls fail to prevent the spread of nonpublic information within financial 

conglomerates.’’ 145

d. Proposed Rule 150.4(b)(2)(i)(D)—No 

Shared Employees That Control Trading 

Decisions 

A commenter said that the 

Commission should clarify that this 

criterion may be met if a shared 

employee participates on the board but 

does not control, direct or participate in 

the trading decisions.146 Another 

commenter requested that the 

Commission clarify that guidance in the 

Proposed Rule about research personnel 

not influencing or directing the entities’ 

trading decisions is properly interpreted 

to mean that research personnel are not 

precluded by this criterion from 

providing market research (including, 

for example, market fundamentals or 

technical indicators, support or 

resistance levels, and trade 

recommendations), so long as the 

research personnel do not direct or 

control trading decisions of the owned 

entities.147

e. Proposed Rule 150.4(b)(2)(i)(E)—No 

Risk Management Systems That Permit 

the Sharing of Trades or Trading 

Strategy 

Several commenters focused on a 

statement in the Proposed Rule that the 

Commission would interpret this 

criterion not to prohibit sharing of 

information for risk management 

purposes, so long as the information is 

not used for trading purposes or shared 

with employees that participate in 

trading decisions.148 These commenters 

asked that the Commission reiterate this 

guidance in the final rule.149 Other 

commenters said that the guidance 

should be set forth as part of the text of 

the final rule, in order to provide a safe 

harbor, or greater certainty, for the 


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150See CL–FIA Nov 13; CL–FIA July 31; CL– 

NGSA Nov 13; Commodity Markets Council on 

February 10, 2014. Another commenter suggested 

that the rule text should provide that owners and 

their affiliates may share such trading information 

as is necessary to manage risk and meet compliance 

obligations. See CL-Working Group Nov 13 

(suggesting rule text allowing ‘‘obtaining such 

information as is necessary to fulfill [the entity’s] 

fiduciary duties or fulfill its duty to supervise the 

trading activities of an affiliate, or . . . establishing 

and monitoring compliance or risk policies and 

procedures, including position limits, for an 

affiliate or on an enterprise wide basis, or . . . 

sharing employees so long as such employees do 

not control, direct or participate in the entities’ 

trading decisions’’). 

151This commenter asserted that the condition 

that the owner entity and owned entity ‘‘do not 

have risk management systems that permit the 

sharing of trades or trading strategy’’ is ambiguous 

and potentially overly broad. See CL–ISDA Nov 12. 

152See CL–CMC Nov 13. 

153See CL–CME Nov 13. 

154See CL–COPE Nov 13. See also CL–AIMA Feb 

10 (criterion should not preclude shared risk 

management systems from allowing access to share 

trade and trading strategies by individuals who do 

not exercise control over trading decisions); CL– 

ECOM Nov 13 (criterion should not preclude 

information sharing for risk management and 

compliance purposes). 

155See CL–SIFMA AMG Nov 13. 

156See CL-Energy Transfer Nov 13. 

157See CL–ISDA Nov 12. 

158See id. 

159See CL–AIMA Feb 10, referring to Proposed 

Rule, 78 FR at 68962. 160See CL–ICE Nov 13. 

sharing of risk management 

information.150

A commenter asked the Commission 

to state that this criterion would not 

preclude disaggregation relief when 

there is sharing of information for only 

risk management and surveillance and 

other non-trading purposes, such as, for 

example, information used to assess 

collateral requirements or verify 

compliance with applicable credit limits 

or information maintained by a 

custodian or other service provider that 

does not control trading.151

Other commenters suggested various 

formulations for Commission guidance 

or rule text to set out circumstances in 

which this criterion would be 

interpreted not to preclude 

disaggregation relief, so long as the 

employees who have access to the 

shared information do not control, 

direct or participate in the entities’ 

trading decisions. The circumstances 

suggested by commenters include: 

• Information sharing as is necessary 

to fulfill fiduciary duties or duties to 

supervise trading, or to monitor risk 

limits on an enterprise wide basis;152

• sharing of transaction and position 

information with and among employees 

who perform risk management, 

accounting, compliance or similar midand back-office functions; 153

• information sharing for risk 

management purposes; 154

• continuous sharing of position 

information for risk management and 

surveillance purposes only, sharing of 

trading and position information for risk 

management purposes (even on a realtime basis and even if the entity’s risk 

management systems or personnel have 

authority to require the reduction of 

positions to comply with applicable 

limits), and using shared risk 

management services, including realtime data sharing and position 

reduction mechanisms, so long as they 

do not permit coordinated or shared 

trading;155

• sharing of derivative information 

with senior management or risk 

committee members that oversee the 

risks of more than one operating 

company, for risk management, 

accounting, compliance, or similar 

purposes (even if these personnel have 

authority to reduce exposure or comply 

with internal risk guidelines), and 

sharing of trading and position 

information for risk management 

purposes, even if such information is 

shared on a real-time or end-of-day basis 

and even if the risk management 

systems or personnel have authority to 

reduce positions to comply with 

applicable limits or other restrictions 

that senior management or the risk 

personnel may impose; 156 and 

• information sharing resulting from 

use of an affiliated service provider, 

such as an affiliated FCM, an affiliated 

custodian, an affiliate engaged in 

recordkeeping or reporting information, 

or an affiliate providing clearing, 

custodial, or other non-trading services 

for the owned entity.157

Commenters also asserted that 

employees at the owner entity who are 

not directly or indirectly involved in 

trading or the supervision of traders, 

and are prohibited from sharing 

information with owner entity traders, 

should be permitted to receive trading 

activity and position exposure 

information of the owned entity,158 and 

that the categories of employees referred 

to in the guidance in the Proposed Rule 

are not intended to be restrictive, so 

that, for example, entities could share 

sales staff without leading to shared 

knowledge of trading decisions.159

Another commenter said that the 

Commission should interpret this 

criterion not to preclude disaggregation 

relief when information sharing is 

limited to employees involved in riskmanagement, compliance, execution or 

recordkeeping functions, so long as the 

functions are conducted pursuant to 

written procedures that protect the 

information from access by individuals 

involved in trading decisions, and there 

is no access by individuals who develop 

or execute trading strategies to the 

information shared for risk 

management.160

3. Final Rule 

The Commission is adopting rule 

150.4(b)(2)(i) largely as proposed, with 

certain modifications described below 

in response to commenters and other 

considerations. 

First, the lead in sentence of rule 

150.4(b)(2)(i) includes the addition of 

the phrase ‘‘(to the extent that such 

person is aware or should be aware of 

the activities and practices of the 

aggregated entity or the owned entity).’’ 

The effect of adding this phrase is to 

apply the criteria in this rule to both the 

person who is required to aggregate 

positions and the aggregated or owned 

entity, but only to the extent that the 

person required to aggregate is aware or 

should be aware of the activities and 

practices of the aggregated or owned 

entity. This addition recognizes that, as 

commenters pointed out, an owner may 

not have knowledge of or an ability to 

find out about the trading practices of 

an owned entity. The Commission 

understands the phrase ‘‘should be 

aware’’ to mean that the owner is 

charged with awareness of the owned 

entity’s activities if it is, in effect, able 

to control the owned entity or routinely 

has access to relevant information about 

the owned entity. If the owner is not 

aware, and should not be aware, of the 

owned entity’s activities, it would not 

have to certify as to the owned entity. 

The Commission believes that this 

modification addresses the comments 

on subparagraph (A) to the effect that 

passive investors in an owned entity 

should be required to certify only that 

they have no knowledge of the owned 

entity’s trading. Therefore, the final rule 

adopts subparagraph (A) as it was 

proposed. 

The final rule adopts subparagraph 

(B), relating to separately developed and 

independent trading systems, as it was 

proposed. The term ‘‘system’’ is 

appropriately broad to encompass the 

various methods, procedures and plans 

which market participants may use to 

initiate trading. ‘‘Trading system’’ 

includes, for example, a program 

(whether automated or not) that 

provides the impetus for the initiation 

of trades. The suggested alternative, 

‘‘strategy,’’ is too narrowly limited to the 

particular trading decisions a person 

may make based on particular 

conditions. The entire ‘‘trading system,’’ 

not just the ‘‘trading strategy,’’ must be 


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161The Proposed Rule noted that ‘‘off-the-shelf’’ 

software could be considered to be separately 

developed and independent for this purpose, so 

long as the software could not be used by multiple 

parties to indirectly coordinate their trading. See 

Proposed Rule, 78 FR at 68962. The Commission 

reaffirms this position, and in response to 

commenters (see footnote 138, above), clarifies that 

customized software or in-house software could 

also be considered to be separately developed and 

independent for this purpose, so long as the same 

standard is met. 

162See Proposed Rule, 78 FR at 68962. 

163For example, Trader A may use a trading 

system to develop trading ideas, and then use a 

widely-used order execution platform to execute 

those ideas, while affiliated Trader B (with no 

knowledge of Trader A’s trading system) may 

qualify for disaggregation when Trader B uses an 

independent trading system to develop trading 

ideas, and executes those ideas on the same order 

execution platform that Trader A uses, provided 

Trader B does not have access to Trader A’s 

executions (and vice versa). 

164For consistency, the phrase ‘‘document 

routing and other procedures or’’ is also deleted 

from rule 150.4(b)(4)(i)(A). 

165See Proposed Rule, 78 FR at 68962. 

166See id. See also the discussion above regarding 

the condition under 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). 

167 In this respect, rule 150.4(b)(2)(i)(D) is 

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. In 

that interpretive letter, 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. 

168See CL–MFA Feb 7. 

169 1979 Aggregation Policy, 44 FR at 33844. 

170For example, the rule would preclude Trader 

A and affiliated Trader B from having a risk 

management system that permits the sharing of 

Trader A’s trades or trading strategy with 

employees that control the trading decisions of 

Trader B, or that permits the sharing of Trader B’s 

trades or trading strategy with employees that 

control the trading decisions of Trader A. 

But, in conjunction with that limitation, the rule 

would not preclude Trader A and affiliated Trader 

B from having a risk management system that 

permits the sharing of Trader A’s trades or trading 

strategy with employees that handle risk 

management functions for Trader B but do not 

control its trading decisions. 

171See Proposed Rule, 78 FR at 68962. 

172The Commission remains concerned 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 

Continued 

separately developed and 

independent.161

The Commission reiterates that, as 

stated in the Proposed Rule, the purpose 

of this requirement is to preclude use of 

a trading system to coordinate the 

trading of two or more entities.162 Thus, 

it is the trading system that provides the 

impetus for the initiation of trades 

which must be separately developed 

and independent, not the mechanism or 

software that carries out those trades. 

For this reason, the Commission does 

not believe that use of a shared order 

execution platform, with appropriate 

firewalls, would necessarily mean that 

this condition is not met. For purposes 

of the final rule, an ‘‘order execution 

platform’’ is a computerized process 

that accepts inputs of terms of trades 

desired to be made and then uses predetermined methods to specifically 

place those trades in the markets, while 

a ‘‘trading system’’ is a process or 

method for deciding on the timing and 

direction of trades.163 Thus, for 

purposes of the final rule the 

Commission understands the term 

‘‘trading system’’ not to include an order 

execution platform. Nor would the term 

‘‘trading system’’ include systems used 

for back-office functions such as order 

capture or trade reporting. Also, a 

trading system does not include broad 

principles to guide trading (e.g., 

principles one may learn from publiclyavailable literature). 

Subparagraph (C) of the final rule, 

relating to written procedures to 

maintain independence, including 

separate physical locations, reflects the 

deletion of the phrase ‘‘document 

routing and other procedures or’’ from 

the second sentence. The Commission 

believes that the concept of document 

routing is outmoded and possibly 

confusing (and the concept is 

adequately described by the general 

phrase ‘‘security arrangements’’ which 

is retained in the final rule).164

For the avoidance of doubt, the 

Commission reiterates its guidance from 

the Proposed Rule on the reference in 

subparagraph (C) to separate physical 

locations.165 Subparagraph (C) would 

not necessarily require that the relevant 

personnel be located in separate 

buildings. 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. 

The final rule adopts subparagraph 

(D), relating to sharing of employees that 

control trading decisions, as it was 

proposed. For the avoidance of doubt, 

the Commission reiterates, as it stated in 

the Proposed Rule, that the sharing of 

attorneys, accountants, risk managers, 

compliance and other mid- and backoffice personnel between entities would 

generally not compromise 

independence so long as the employees 

do not control, direct or participate in 

the entities’ trading decisions.166

Similarly, sharing of board or advisory 

committee members or 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.167

One commenter asserted that 

personnel could provide research about 

‘‘technical indicators, support or 

resistance levels, and trade 

recommendations’’ without being 

deemed to be participating in trading 

decisions.168 The Commission believes 

this situation should be viewed in light 

of a previous interpretation, where the 

Commission stated that it ‘‘is concerned 

that specific trading recommendations 

. . . contained in such information not 

be substituted for independently 

derived trading decisions. When the 

person who directs trading in an 

account or program regularly follows 

the trading suggestions [from another 

person], such account or program will 

be evidence that the account is 

controlled by the [other person].’’ 169

The final rule adopts subparagraph 

(E), relating to risk management 

information sharing, substantially as it 

was proposed, but with a revision to 

clarify that the provision is focused on 

the sharing of trades or trading strategy 

with employees that control the trading 

decisions of the other entity.170 The 

Commission notes that provisions 

virtually identical to this rule have been 

used for years in connection with the 

IAC exemption, and the Commission’s 

interpretations of those provisions have 

not changed. The Commission considers 

this revision to the rule text to be a 

clarification of its existing 

interpretations. 

Further, the Commission adopts and 

reiterates its guidance on this provision 

in the Proposed Rule.171 That is, 

subparagraph (E) is intended to address 

concerns that risk management systems 

that permit entities to share trades or 

trading strategies with each other 

present a significant risk of coordinated 

trading through the sharing of 

information.172 The Commission 


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trading strategies even without the sharing of 

trading information. 

173The Commission emphasizes that so long as 

the restrictions discussed here are satisfied, the 

information may be shared on a real-time basis, in 

addition to on an end-of-day basis. As noted above, 

the Commission does not consider knowledge of 

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, but has been 

concerned that the ability to monitor the 

development of positions on a real-time basis could 

constitute knowledge of trading decisions. See 

footnote 116, above. In response to questions from 

commenters, the Commission has considered the 

circumstances in which such information may be 

shared on a real-time basis, and the purpose of the 

discussion here is to explain when real-time sharing 

would be permissible. 

174See, e.g., CL-MidAmerican Feb 7 and 

Commodity Markets Council on July 25, 2014. 

175For example, one commenter recommended 

factors such as whether the owner and the owned 

entity have separate trading accounts, separate 

assets, separate lines of business, independent 

credit support and other specific indications of 

separation. See CL-MidAmerican Feb 7. In the 

Commission’s view, criteria such as these are 

specific manifestations of the general principles 

stated in proposed rule 150.4(b)(2)(i) that the owner 

and the owned entity not have knowledge of the 

trading decisions of the other and trade pursuant to 

separately developed and independent trading 

systems. Similarly, whether the two entities do or 

do not have separate assets or separate lines of 

business would not necessarily indicate whether 

they are engaged in coordinated trading. 

176The criteria in rule 150.4(b)(2)(i) will be 

interpreted and applied in accordance with the 

Commission’s past practices. See footnote 114, 

above. 

177The Commission also proposed an application 

procedure for ownership interests of more than 50 

percent in proposed rule 150.4(c)(2). However, 

since the Commission is not adopting proposed rule 

150.4(b)(3), that application procedure is not 

relevant and the Commission is not adopting 

proposed rule 150.4(c)(2). The text of rule 

150.4(c)(2) in the final rule is a new provision 

discussed below. 

178See Proposed Rule, 78 FR at 68962. 179See id. 180 In the Proposed Rule, the Commission 

clarified 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. See id. 181See id. 182See CL–CME Nov 13; CL–PEGCC Nov 12; CL– 

FIA Nov 13; CL–FIA July 31; CL–ISDA Nov 12; CLintends that, generally speaking, 

subparagraph (E) 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. 

In response to questions from 

commenters, the Commission believes 

that transaction and position 

information may be shared among the 

risk assessment employees of a single 

entity or of affiliated entities as is 

necessary for certain explicitly specified 

risk and compliance purposes, such as 

complying with internal credit limits or 

fulfilling a fiduciary responsibility with 

respect to a third party’s investment. 

However, transaction and position 

information could not be used for nonhedging purposes or shared with 

employees who participate in nonhedging decisions. (‘‘Non-hedging’’ is 

defined in this context as activities to 

take, or liquidate, positions that are not 

bona fide hedging positions.) 

So long as these restrictions are 

satisfied, the information may be shared 

on a real-time basis,173 and may be used 

to effect reductions in non-hedging 

positions, but such reductions should be 

mandated by pre-established credit risk 

management procedures or compliance 

procedures regarding permissible 

investment activities. Within these 

restrictions, affiliated entities may use 

shared risk management services, and 

the information may be used for backoffice recordkeeping and middle-office 

risk assessment, so long as such 

functions occur independently of any 

non-hedging decisions made by other 

employees who did not have access to 

shared information. Companies within 

an affiliated partnership or limited 

liability company structure (i.e., where 

the relevant entities are under common 

ownership or control) may be 

considered to be affiliated for this 

purpose. 

Commenters proposed various 

alternative criteria which could be used 

to determine whether the positions of an 

owner and owned entity could be 

disaggregated.174 However, after 

considering these suggestions, the 

Commission does not believe that the 

suggested criteria are significantly 

different from the criteria in rule 

150.4(b)(2)(i). Also, some of the 

suggested criteria appear to be suitable 

for particular situations, but not 

necessarily all corporate groups.175

Overall, the Commission believes that 

the criteria in rule 150.4(b)(2)(i) are 

appropriate and suitable for determining 

when disaggregation is permissible due 

to a lack of control and shared 

knowledge of trading activities.176

C. Notice Filing Requirement in Rule 

150.4(c) 

1. Proposed Approach 

The Commission proposed a notice 

filing requirement in proposed rule 

150.4(c).177 The proposed rule 

contemplated that the filing would be 

made before the exemption from 

aggregation is needed, since the filing 

would be 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 proposed that the filing 

should be made as promptly as 

practicable.178

Even though a filing under proposed 

rule 150.4(c) could be made after an 

ownership or equity interest is acquired, 

the Commission proposed that the 

exemption from aggregation would not 

be effective retroactively because the 

filing is a pre-requisite to the 

exemption. The Commission reasoned 

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.179

Generally, the Commission proposed 

that entities could consolidate their 

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.180 The Commission also 

emphasized 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.181

2. Commenters’ Views 

Commenters addressed the time limit 

for making the proposed notice filing, 

the situations in which subsequent 

filings (after the initial notice) should be 

required, the consequences for failure to 

make a timely filing, the contents of the 

notice filing and how the notice filing 

should be signed. 

Regarding the time limit for making 

the proposed notice filing, commenters 

said the rule should provide a 

reasonable period of time to file, in 

order to perform due diligence and 

gather information. Several commenters 

suggested that a three-month grace 

period would be reasonable before 

requiring aggregation, because this 

would be adequate to conduct the 

internal review to support and approve 

the notice filing.182


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Energy Transfer Nov 13. One of these commenters 

allowed that aggregation would be required if, 

during the grace period, an owner entity takes 

active steps to control and direct the trading 

strategy of a newly acquired owned entity. See CL– 

ISDA Nov 12. The three month time period was 

said to be adequate for a new owned entity to 

undertake post-closing diligence and operational 

measures to confirm whether seeking or claiming 

the aggregation exemption is necessary. See CLEnergy Transfer Nov 13. Another commenter 

suggested a grace period, but did not suggest a 

specific time period. See CL–SIFMA AMG Nov 13. 

183See CL-Working Group Nov 13; CL–EEI Nov 

13; CL–FIA Nov 13; CL–NGSA Nov 13; CL–CME 

Nov 13. 

184See CL-Energy Transfer Nov 13. 

185See CL–ISDA Nov 12. 

186See CL–CME Nov 13. 

187This commenter asserted that this 

modification would not undermine the 

Commission’s aggregation rule because it would 

apply only where an entity is entitled to an 

exemption from the aggregation requirement. See 

CL–FIA Nov 13. 

188See CL–FIA Nov 13; CL–FIA July 31; CL–CME 

Nov 13; CL–IECA Nov 13. 

189See CL–ISDA Nov 12 and CL–PEGCC Nov 12. 

190See CL–ISDA Nov 12 and CL–PEGCC Nov 12. 

191This commenter felt that the signature 

requirement in the proposed rule appears casual 

and may lead the owner entity to assume that 

granting of exemptions from aggregation would be 

routine, while they should be exceptional. See CL– 

IATP Feb 10. 

192See rule 150.4(c)(2). Rule 150.4(c)(2) is new 

text that was not included in the Proposed Rule, but 

rather is adopted in response to commenters’ 

suggestions. As noted in footnote 177, above, the 

Commission is not adopting proposed rule 

150.4(c)(2). 

193 In this regard, the Commission disagrees with 

commenters who argued that if a market participant 

relies on an exemption from aggregation in good 

faith, but the Commission subsequently determines 

that an exemption was not available, the 

Commission should require aggregation only from 

the date of its determination. See CL–FIA Nov 13; 

CL–FIA July 31; CL–CME Nov 13; CL–IECA Nov 13. 

194See Proposed Rule, 78 FR at 68975. 

Regarding the situations in which 

subsequent filings (after the initial 

notice) should be required, several 

commenters stated that a subsequent 

filing should be required only in the 

event of a material change to the facts 

set forth in the relevant notice filing.183

One commenter thought that a 

subsequent filing should be required 

only if there was a change in the ability 

to comply with the conditions of the 

exemption so that the criteria for 

disaggregation are no longer met, but 

not upon a mere internal reorganization 

of an affiliate which does not affect 

compliance with the criterion.184

Another commenter said a subsequent 

filing should be required only when an 

owner entity is withdrawing the notice 

filing because it no longer maintains a 

requisite ownership interest in the 

owned entity, or in the event that the 

owner entity is no longer in compliance 

with the exemption criteria with respect 

to an owned entity or another material 

change in the contents of the notice 

filing has occurred.185

Regarding the consequences for 

failure to make a timely filing, one 

commenter proposed that the rule allow 

an entity five business days after 

exceeding a position limit to make the 

notice filing, if the entity is otherwise 

eligible to claim an exemption from 

aggregation and was deemed in excess 

of a position limit only because of 

aggregation from which it could have 

been exempt.186 Another commenter 

said that if an entity is eligible to claim 

an exemption from aggregation, but fails 

to make a timely notice filing, that 

should constitute only a single violation 

for failure to make the filing, not a 

separate violation of position limits.187

Other commenters addressed a slightly 

different situation, contending that if a 

market participant relies on an 

exemption from aggregation in good 

faith, but the Commission subsequently 

determines that an exemption was not 

available, the Commission should 

require aggregation only from the date of 

its determination.188

Regarding the contents of the notice 

filing, two commenters requested that 

the Commission remove the 

requirement to provide a description of 

the relevant circumstances that warrant 

disaggregation in proposed rule 

150.4(c)(1)(i), and instead require only a 

certification that the owner entity, as of 

the date of the filing, meets the 

conditions of the exemption with 

respect to each owned entity specified 

in the filing.189

Regarding signature of the notice 

filing, two commenters asked that the 

Commission clarify that the specific 

senior officer signing or submitting the 

notice filing may be any individual 

appropriately determined within the 

context of a particular owner entity’s 

governance structure.190 On the other 

hand, another commenter asserted that 

the rule should specifically require that 

the notice filing be signed by the CEO 

and the chief compliance officer or chief 

of risk management of the owner 

entity.191

3. Final Rule 

The Commission is adopting rule 

150.4(c) largely as proposed, with 

certain modifications to reflect points 

made by commenters. Primarily, rule 

150.4(c) includes a modification to 

provide for a 60-day period after 

acquisition of an ownership interest to 

conduct due diligence and prepare the 

notice filing.192 In other words, a notice 

filing made within 60 days after an 

acquisition would have retroactive 

effect as of the date of acquisition. The 

Commission believes that a 60-day 

period would be adequate for the 

acquirer to perform due diligence and 

gather the information necessary to 

make the notice filing. 

Rule 150.4(c) has also been modified 

to address a situation where a person is 

eligible to claim an exemption from 

aggregation, but does not make a filing 

at the proper time. In this case, rule 

150.4(c)(6) provides that the failure to 

timely file the notice would be a 

violation of rule 150.4(c), but there 

would not be a violation of the 

aggregation requirement or of a position 

limit so long as the required filing is 

made within five business days after the 

person is aware, or should have been 

aware, that the notice has not been 

timely filed. That is, since the person 

was eligible to claim the exemption, 

aggregation was not required, but a 

violation of the filing requirement has 

occurred. 

On the other hand, the Commission 

does not believe relief is appropriate if 

a person is not eligible to claim an 

exemption from aggregation, but 

erroneously believes that it is (even if 

the error occurs in good faith). In this 

case, the person could not ‘‘cure’’ the 

situation by taking steps to become 

eligible for the exemption, and then 

attempting to provide the notice filing 

with retroactive effect.193 Where the 

person is not eligible for any exemption 

from aggregation and therefore 

aggregation is required, the ineligibility 

cannot be cured by making a later notice 

filing. 

As for a requirement to make filings 

subsequent to the initial filing, the 

Commission believes that a further 

filing is required only in the event of a 

material change to the facts set forth in 

the relevant notice filing, as is stated in 

rule 150.4(c)(4). The Commission 

understands that the Proposed Rule 

referred at one point to persons making 

one filing each year, but this was in the 

context of estimating how often filings 

might occur.194 The Commission did 

not intend that notices be filed annually 

in the absence of a material change. 

As for the content of the notice filing, 

rule 150.4(c) includes the same 

requirements as were in the proposed 

rule. The Commission has not removed 

the requirement to provide a description 

of the relevant circumstances that 

warrant disaggregation, because it 

believes that a short description of 

circumstances helps the Commission 

and its staff to understand the context 

of the filing. In this regard, the 

Commission notes that under the earlier 

proposed amendment to part 151, the 

person claiming the exemption would 


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195See Proposed Rule, 78 FR at 68952. 

196The Commission is adopting a delegation of 

authority to the Director of the Division of Market 

Oversight or the Director’s designee to call under 

rule 150.4(c)(3) for additional information from a 

person claiming an aggregation exemption. See rule 

150.4(e)(1)(ii). This parallels a provision in 

proposed rule 150.4(e)(1) delegating authority to 

call for additional information from a person 

claiming the exemption in proposed rule 150.4(b)(9) 

(renumbered (b)(8) in the final rule). The 

subparagraphs in rule 150.4(e)(1) have been 

renumbered from the proposed rule, because as 

noted in footnote 77, the Commission is not 

adopting proposed rule 150.4(e)(1)(i), which 

contained a delegation of authority referencing 

proposed rule 150.4(b)(3). Also, the cross-references 

in rule 150.4(e)(1)(i) have been corrected to refer to 

paragraph (b)(8)(iv) and paragraph (b)(8). 

197See Proposed Rule, 78 FR at 68959. 

198As noted above, because the Commission is 

not adopting proposed rule 150.4(b)(3), paragraphs 

(b)(4) to (b)(9) of proposed rule 150.4 are 

renumbered in the final rule as paragraphs (b)(3) to 

(b)(8), respectively. Thus, final rule 150.4(b)(8) 

corresponds to proposed rule 150.4(b)(9). 

199See Proposed Rule, 78 FR at 68975. 

200For 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. See Proposed 

Rule, 78 FR at 68953. 

201Although 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. See id. 

202See id. 

203See Proposed Rule, 78 FR at 68958. 

204See Proposed Rule, 78 FR at 68959. 

have been required to demonstrate 

compliance with each condition of 

relief, which would likely include an 

organizational chart showing the 

ownership and control structure of the 

involved entities, a description of risk 

management and information-sharing 

systems, and an explanation of trade 

data and position information 

distribution.195 The Commission has not 

specifically adopted this guidance for 

rule 150.4(c). Instead, the Commission 

notes the distinction between rule 

150.4(c)(1)(i), which requires a 

description of the relevant 

circumstances that warrant 

disaggregation to be included in each 

filing, and rule 150.4(c)(3), which 

allows the Commission to obtain 

information demonstrating that the 

person meets the requirements of the 

exemption in those cases where the 

Commission calls for such 

information.196

With regard to signature of the notice 

and the certification requirement in rule 

150.4(c)(1)(ii), the Commission believes 

that rule 150.4(c) is satisfied when the 

notice containing the statement required 

by 150.4(c)(1)(ii) is signed by a senior 

officer of the entity claiming relief from 

the aggregation requirement or, if the 

entity does not have senior officers, a 

person of equivalent authority and 

responsibility with respect to the entity. 

D. Other Issues Related to Aggregation 

on the Basis of Ownership 

The Proposed Rule discussed or 

requested comment on several other 

issues related to aggregation due to 

ownership of another entity, or relief 

from that requirement. In addition, 

commenters raised certain 

miscellaneous issues related to the rule. 

These issues were the effective date for 

the final rule, how entities that hold an 

interest in the entity that submits a 

notice should be treated (i.e., the 

treatment of ‘‘higher-tier entities’’), 

whether aggregation should be required 

on a basis pro rata to the ownership 

interest in the owned entity, and how 

the aggregation rule would interact with 

other Commission rules. 

1. Proposed Approach 

Regarding the effective date for the 

final rule, the Commission discussed in 

the Proposed Rule a potential transition 

period for application of the 

requirement of aggregation based on 

ownership. However, the Commission 

concluded that this would not be 

necessary because the Proposed Rule 

would apply to existing position limits 

currently in effect and would provide 

further aggregation exemptions.197

Therefore, the Proposed Rule did not 

suggest any compliance period or 

delayed effectiveness of the final rule. 

Regarding the treatment of higher-tier 

entities, proposed rule 150.4(b)(9) 198

provided that if an owned entity has 

filed a notice under proposed rule 

150.4(c), 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, if such person complies 

with the conditions applicable to the 

exemption specified in the owned 

entity’s notice filing, other than the 

filing requirements; and does not 

otherwise control trading of the 

accounts or positions identified in the 

owned entity’s notice. Further, 

proposed rule 150.4(b)(9) provided that 

any person relying on the exemption for 

higher-tier entities must provide to the 

Commission information concerning the 

person’s claim for exemption called for 

by the Commission. 

In the Proposed Rule, the Commission 

noted that the proposed approach for 

higher-tier entities should significantly 

reduce the filing requirements for 

aggregation exemptions.199 The 

proposed approach would allow highertier entities to 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.200 The 

proposed approach would also mean 

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.201 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.202

Regarding aggregation on a basis that 

is pro rata to the relevant ownership 

interest, the Commission preliminarily 

concluded in the Proposed Rule that a 

pro rata approach would be 

administratively burdensome for both 

owners and the Commission.203 For 

example, the Commission suggested that 

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 stated that it 

has historically interpreted the statute to 

require aggregation of all the relevant 

positions of owned entities, absent an 

exemption, which 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. 

However, the Commission asked 

commenters to address whether the 

Commission should permit a person to 

aggregate only a pro rata allocation of 

the owned entity’s positions based on 

that person’s less than 100 percent 

ownership, including a system for 

aggregation based on ownership tiers.204


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205See Proposed Rule, 78 FR at 68963, referring 

to Position Limits for Derivatives, 78 FR 75680 

(Dec. 12, 2013). 

206See CL–ISDA Nov 12; CL–PEGCC Nov 12; CL– 

FIA Feb 6; CL–Working Group Feb 10; CL–AIMA 

Feb 10; CL–ICE Nov 13. 

207See id. 

208See CL–Working Group Nov 13and CL– 

Working Group Feb 10. That is, all affiliates, not 

just higher-tier entities, could rely on a filing made 

by one entity in an affiliated group. 

209See CL–FIA Feb 6. See also CL–COPE Feb 10; 

CL–SIFMA AMG Feb 10. 

210See CL–MFA Feb 7. 

211See CL–DBCS Feb 10 and CL-Working Group 

Feb 10, respectively. 

212See American Gas Association on February 10, 

2014 (‘‘CL–AGA Feb 10’’). 

213See id. 

214See CL–ICE Feb 10. 

215See id. (asserting that lifting one side of a large 

two-sided spread would result in a big open interest 

change). 

216See id. 

217See id. 

218See id. 

219As noted above, because the Commission is 

not adopting proposed rule 150.4(b)(3), paragraphs 

(b)(4) to (b)(9) of proposed rule 150.4 are 

renumbered in the final rule as paragraphs (b)(3) to 

(b)(8), respectively. Thus, final rule 150.4(b)(8) 

corresponds to proposed rule 150.4(b)(9). 

The Commission also invited 

comment on the interplay between the 

Proposed Rule and other Commission 

rules. In the Proposed Rule, the 

Commission asked commenters to 

address the issues or concerns arising 

from the Proposed Rule that would have 

to be addressed if the Commission were 

to adopt its proposal to establish 

speculative position limits for other 

exempt and agricultural commodity 

futures and option contracts, and 

physical commodity swaps that are 

‘‘economically equivalent’’ to such 

contracts.205 The Commission also 

asked about implications with respect to 

the interplay between the proposed 

disaggregation relief and the 

Commission’s other rules relating to 

swaps. 

2. Commenters’ Views 

Regarding the effective date for the 

final rule, several commenters said that 

the rule should provide for an initial 

compliance or transition period during 

which the rule would not be enforced 

and market participants would be able 

to adjust their positions to the new 

aggregation rules.206 The period of time 

suggested for this transition ranged from 

two and one-half months to nine 

months.207

Commenters did not address the 

terms of proposed rule 150.4(b)(9), 

relating to higher-tier entities. One 

commenter said that an entity should be 

able to file for aggregation relief on 

behalf of any or all of its affiliates 

(including joint ventures) as long as the 

criteria for relief are satisfied for the 

entities receiving relief.208

Regarding aggregation on a basis pro 

rata to the ownership interest in the 

owned entity, one commenter thought 

that the rule should permit entities to 

aggregate on a basis pro rata to the 

person’s ownership or equity interest, 

because pro rata aggregation would 

more accurately reflect the positions 

owned by market participants and 

would not unnecessarily restrict the 

positions of market participants, while 

reducing the risk of an inadvertent 

position limits overage.209 Another 

commenter supporting pro rata 

aggregation suggested that the 

Commission obtain the pro rata 

percentage that should be attributed to 

the owner from the owner’s filings on 

Form 40 and the Commission’s special 

call authority.210 To address potential 

administrative burdens on the 

Commission, commenters proposed that 

entities that apply pro rata aggregation 

would have to commit to informing the 

Commission promptly upon a change in 

the relevant ownership or equity 

interest, or upon request by the 

Commission.211

In response to the Commission’s 

request for information on implications 

with respect to the interplay of the 

aggregation provisions and other 

Commission rules, one commenter 

thought that the full implications of 

disaggregation relief ‘‘will not be readily 

apparent to physical commodity market 

participants’’ until the Commission 

finalizes the scope of contracts to be 

included in position limits, especially 

with regards to trade options, the 

treatment of which may have a 

‘‘dramatic impact on whether or not 

affiliated energy business units . . . 

require disaggregation relief.’’ 212

Further, this commenter said, the 

manner of organizing physical 

commodity contracts is likely to be 

distinct from how financial transactions 

are organized and executed, and a 

policy requiring aggregation of both 

would ‘‘create undue hardships’’ for 

energy end-users unless there are 

‘‘accessible, practicable means’’ of 

acquiring disaggregation relief.213

Another commenter, which is a DCM, 

sought clarification of how the proposed 

aggregation requirement would affect 

the reporting of large trader positions, 

asserting that reporting firms currently 

aggregate accounts for reporting 

purposes by ownership and control so 

that independently operated 

subsidiaries of a wholly-owned parent 

currently report such positions 

separately in large trader reports and 

open interest.214 This commenter 

believed that if both firms were to 

aggregate those positions, each could 

carry large positions on opposite sides 

of the market but would only report a 

small aggregate position, which could 

be highly disruptive to the markets.215

The commenter requested that the 

Commission make clear that ‘‘the 

current reporting regime would be 

maintained and not affected by 

whatever form the final aggregation rule 

takes.’’ 216

This same commenter also requested 

the Commission to confirm that ‘‘an 

exchange will continue to be permitted 

to grant separate exemptions to 

commonly owned affiliates when the 

affiliates are required to be aggregated,’’ 

and that ‘‘if firms that are aggregated 

submit separate Form 204s to the 

Commission, . . . the quantities 

reported roll up to the aggregate level 

for position limit purposes.’’ 217 The 

commenter noted that it currently 

permits ‘‘commonly owned entities that 

are under separate decision-making and 

trading control to transact EFRPs and 

block trades with each other’’ and asked 

the Commission to indicate if these 

entities would be required to aggregate 

for position limit purposes, and whether 

‘‘EFRPs and block trades executed 

between such firms [are] prohibited 

trades under the CEA.’’ 218

3. Final Rule 

The final rule will be effective 60 days 

after publication in the Federal 

Register. The Commission considered 

comments requesting an additional 

compliance or transition period during 

which the rule would not be enforced 

and has determined additional time 

would not be necessary or appropriate 

for this rule. One effect of the final rule 

is to provide for certain exemptions 

from the aggregation requirement. 

Considering both the relief available 

under the exemptions and the 

requirements imposed by the final rule, 

the Commission concluded that a period 

of 60 days would be appropriate to 

prepare for effectiveness of the final 

rule. 

As for higher-tier entities, the 

Commission is adopting rule 150.4(b)(8) 

largely as it was proposed,219 but with 

a modification to provide that one entity 

may file a notice for aggregation relief 

on behalf of any or all of its affiliates, 

as long as the criteria for relief are 

satisfied. The Commission finds merit 

in a commenter’s suggestion that 

reliance by affiliates on a filing made by 

one entity in an affiliated group should 

be permitted for the same reasons that 

higher-tier entities would be permitted 

to rely on filings made by subsidiaries. 


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220See Proposed Rule, 78 FR at 68958. 

221As noted above, because the Commission is 

not adopting proposed rule 150.4(b)(3), paragraphs 

(b)(4) to (b)(9) of proposed rule 150.4 are 

renumbered in the final rule as paragraphs (b)(3) to 

(b)(8), respectively. Thus, final rule 150.4(b)(3) 

corresponds to proposed rule 150.4(b)(4). 

222See Proposed Rule, 78 FR at 68964. 

223As noted above, because the Commission is 

not adopting proposed rule 150.4(b)(3), paragraphs 

(b)(4) to (b)(9) of proposed rule 150.4 are 

renumbered in the final rule as paragraphs (b)(3) to 

(b)(8), respectively. Thus, final rule 150.4(b)(5) 

corresponds to proposed rule 150.4(b)(6). 

224See 15 U.S.C. 78o. Final rule 150.4(b)(6) 

corresponds to proposed rule 150.4(b)(7). 

225As initially proposed, the rule also required 

that the broker-dealer not have a greater than a 50 

percent ownership or equity interest in the owned 

entity. See Proposed Rule, 78 FR at 68977. In the 

Supplemental Notice, the Commission proposed to 

remove this requirement for the reasons supporting 

removal of the separate conditions for owners of a 

greater than a 50 percent ownership or equity 

interest in general. See Supplemental Notice, 80 FR 

at 58371. 

226See Proposed Rule, 78 FR at 68964. 

227The 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. See id. 

228As proposed, the exemption would encompass 

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. 

See id. 

229See CL–IATP Feb 10. 

230See id. 

The Commission clarifies that, in order 

to meet the requirements of rule 

150.4(c), a filing made on behalf of 

affiliates must be signed by a senior 

officer (or equivalent) of each such 

affiliate. The Commission intends that 

filing on behalf of affiliates will be 

optional; affiliates may also file 

individual notices. 

Regarding aggregation on a pro rata 

basis, the Commission concludes that 

although the commenters point out the 

theoretical merits of a pro rata 

procedure, none of them explained how 

pro rata aggregation would be workable 

in practice. The Commission did not 

propose adopting pro rata aggregation, 

because it was concerned about the 

administrative burdens for both owners 

and the Commission.220 After 

considering the comments received, the 

Commission has determined not to 

adopt a pro rata procedure because it 

remains concerned about the difficulty 

of specifying a broadly applicable 

procedure for calculating the level of 

ownership interests and using those 

levels to allocate positions to the owner 

entity. The Commission also finds merit 

in the procedure that has been applied 

to date (under which owners aggregate 

all of the relevant positions of the 

owned entities for which aggregation 

applies) and concludes that the 

potential benefits of a pro rata 

procedure do not support changes in the 

current practice. 

In response to the comments about 

the interplay of the aggregation 

provisions and other Commission rules, 

the Commission clarifies that, generally 

speaking, the final aggregation rules are 

intended for purposes of position limits 

and would not modify practices with 

respect to other rules. Exchanges will 

continue to be permitted to require 

separate reporting by aggregated 

entities, and to grant separate 

exemptions to aggregated entities. Also, 

exchanges will continue to be able to 

enforce separate limits on entities that 

are aggregated for federal limits. 

E. Exemption for Certain Accounts Held 

by FCMs in Rule 150.4(b)(3) 

1. Proposed Approach 

The Commission proposed to move 

the exemption for certain accounts held 

by FCMs in existing regulation 150.4(d) 

to a new proposed rule 150.4(b)(4),221 so 

that all aggregation exemptions would 

be located in paragraph (b) of proposed 

rule 150.4. The text of proposed rule 

150.4(b)(4) was substantially the same 

as existing regulation 150.4(d), except 

that it was rephrased in the form of a 

positive statement of the availability of 

an exemption from the aggregation 

requirement, as contrasted to the 

statement in the existing regulation that 

the aggregation requirement applies 

unless certain conditions are met.222

2. Commenters’ Views and Final Rule 

No commenter addressed proposed 

rule 150.4(b)(4). The Commission is 

adopting it as proposed, but renumbered 

as rule 150.4(b)(3). 

F. Exemptions From Aggregation for 

Underwriting and Broker-Dealer 

Activities in Rules 150.4(b)(5) and (b)(6) 

1. Proposed Approach 

Proposed rule 150.4(b)(6) 223 stated 

that 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. 

This proposal was similar to regulation 

151.7(g) (in the now-vacated part 151 

regulations), which provided for an 

exemption from aggregation where an 

ownership interest is in an unsold 

allotment of securities. 

Proposed rule 150.4(b)(7) stated that a 

broker-dealer registered with the 

Securities and Exchange 

Commission,224 or similarly registered 

with a foreign regulatory authority, need 

not aggregate the positions or accounts 

of an owned entity if the ownership or 

equity interest is based on the 

ownership of securities acquired in the 

normal course of business as a dealer, so 

long as the broker-dealer does not have 

actual knowledge of the trading 

decisions of the owned entity.225

In the Proposed Rule, the Commission 

noted that the ownership interest of a 

broker-dealer 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).226 In both 

circumstances, the ownership interest is 

likely not held for investment 

purposes.227 Accordingly, the 

Commission proposed to include an 

aggregation exemption in proposed rule 

150.4(b)(7) for such activity.228

2. Commenters’ Views 

Commenters did not address 

proposed rule 150.4(b)(6). 

One commenter said the rationale for 

the broker-dealer exemption in 

proposed rule 150.4(b)(7) should be 

expanded and clarified, asserting that if 

a broker-dealer acquires a substantial 

but not controlling interest in a trading 

entity, its due diligence would reveal 

historical information while the 

availability of an exemption appears to 

be conditioned upon acquiring no 

further knowledge.229 The commenter 

asked that the Commission provide 

further explanation of what constitutes 

‘‘actual knowledge,’’ and in particular 

whether it is limited to knowledge at the 

moment of acquisition, or also includes 

any knowledge of trading decisions by 

the newly acquired entity and other 

entities in which the broker-dealer has 

an equity based interest.230

3. Final Rule 

The Commission is adopting rule 

150.4(b)(6) as it was proposed, but 

renumbered as rule 150.4(b)(5). For 

purposes of this rule, the Commission 

expects to interpret the term ‘‘unsold 

allotment’’ along the lines that it is 

interpreted under the Securities 

Exchange Act of 1934. 

The Commission is adopting rule 

150.4(b)(7) as it was proposed in the 

Supplemental Notice, but renumbered 

as rule 150.4(b)(6). In response to the 

commenter’s question, the Commission 

clarifies that it expects traditional 


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231See Proposed Rule, 78 FR at 68964. 

232As noted above, because the Commission is 

not adopting proposed rule 150.4(b)(3), paragraphs 

(b)(4) to (b)(9) of proposed rule 150.4 are 

renumbered in the final rule as paragraphs (b)(3) to 

(b)(8), respectively. Thus, final rule 150.4(b)(7) 

corresponds to proposed rule 150.4(b)(8). 

233See Proposed Rule, 78 FR at 68950. 

234See Proposed Rule, 78 FR at 68948. 

235See Proposed Rule, 78 FR at 68950. 

236See Proposed Rule, 78 FR at 68949. 

237See Proposed Rule, 78 FR at 68950. 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 

believed 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. See id. 

238See id. 

239See id. 

240See id. 

241See id. 

standards of a broker-dealer’s due 

diligence to apply for this provision. As 

stated in the Proposed Rule,231 the 

Commission would interpret the phrase 

‘‘reasonable activity’’ to be effectively 

synonymous with the phrase ‘‘normal 

course of business’’ in this context. 

G. Exemption From Aggregation Where 

Information Sharing Would Violate Law 

in Rule 150.4(b)(7) 

1. Proposed Approach 

a. In General 

The Commission proposed rule 

150.4(b)(8) 232 to provide exemptions 

from aggregation under certain 

conditions where the sharing of 

information would cause a violation of 

state or federal law or the law of a 

foreign jurisdiction, or regulations 

adopted thereunder. These exemptions 

have not previously been available 

under the Commission’s existing rules. 

The Commission intended that the 

proposed rule 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 law or 

regulations.233 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.234 Also, it would 

not be necessary to show that a 

comparable federal law exists in order 

for a state law to be the basis for an 

exemption.235

The Commission stated that the 

proposed rule was intended to respond 

to concerns that market participants 

could face increased liability under 

state, federal and foreign law. For 

example, the proposed rule would 

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.236

b. Laws of Non-U.S. Jurisdictions and 

International Law 

The proposed rule would not allow 

local law or principles of international 

law (as opposed to the specific laws of 

foreign jurisdictions) to be a basis for 

the exemption. With regard to local law, 

the Commission stated 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. While the number of such laws 

and regulations may be large, the 

Commission was 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.237

Furthermore, the Commission was 

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 

concluded that the better course is not 

to provide for local law to be a basis for 

the exemption.238

With regard to international law, the 

Commission believed 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.239

c. Memorandum of Law 

Under proposed rule 150.4(b)(8), 

market participants would be required 

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 explained 

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. The 

memorandum of law would allow 

Commission staff to review the legal 

basis for the asserted statutory or 

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 memorandum, and to 

coordinate the development of rules 

surrounding information sharing and 

aggregation across accounts. The 

Commission stated its expectation that a 

written memorandum of law would, at 

a minimum, contain information 

sufficient to serve these purposes.240

The Commission also noted 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 noted 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. 241

On the other hand, the Commission 

did not believe that 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. 

Also, the question of what legal 


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242See id. 

243See id. 

244See CL–AGA Feb 10. 

245See CL–IATP Feb 10. 

246See CL-Working Group Feb 10 and Alternative 

Investment Management Association on February 

10, 2014 (‘‘CL–AIMA Feb 10’’), respectively. 

247See (CL–AIMA Feb 10). 

248See CL–FIA Feb 6. 

249See CL-Better Markets Feb 10 (also arguing 

that the CEA requires an entity to obtain a legal 

opinion to avail itself of an aggregation exemption, 

and it is not within the discretion of the 

Commission to waive this requirement). 

250See Proposed Rule, 78 FR at 68950. 

251See id. 

252See Position Limits for Futures and Swaps, 76 

FR 71626, 71654 (Nov. 18, 2011). The provision was 

adopted as rule 151.7(d) (since vacated). 

253 Id. 

254See id. 

255See Proposed Rule, 78 FR at 68951 n 39. 

256See Investment Company Institute on 

February 10, 2014 (‘‘CL–ICI Feb 10’’) (asserting that 

investment strategies that do not necessarily dictate 

the same specific trades should not be considered 

‘‘substantially identical,’’ noting that registered 

investment companies may be managed by 

unaffiliated advisors that follow similar strategies 

disclosed in their prospectuses). 

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.242

Proposed rule 150.4(b)(8) also 

included 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 believed 

it 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 was not intended to 

limit the types of information that may 

be relevant.243

2. Commenters’ Views 

One commenter supported the 

proposal and said the Commission 

should include in the final regulatory 

text or preamble ‘‘all elements’’ of the 

discussion in the Proposed Rule as to 

what constitutes a state law, who can 

prepare the memorandum of law, and 

what must be included in such 

memorandum, in order to provide 

clarity and ensure the process for 

seeking relief has its intended effects.244

Another commenter called for the 

Commission to expand on this provision 

by granting foreign law-based 

exemptions on cross-border compliance, 

and developing memoranda of 

understanding with foreign jurisdiction 

authorities concerning the criteria for 

substituted compliance for aggregation 

exemptions.245

Other commenters said the 

Commission should clarify whether the 

violation of law exemption would be 

available for other regulations 

promulgated by the Commission, or for 

supranational laws, including those 

promulgated by the European Union.246

A commenter asked the Commission to 

clarify whether the memorandum may 

be prepared by an employee of the firm, 

or of an affiliate of the firm, that is 

seeking the exemption.247

Another commenter suggested that 

the rule permit filing of a summary 

explanation of legal restrictions in lieu 

of a full legal memorandum (provided 

the full memorandum is available for 

inspection by the Commission upon 

request), to protect privileged attorneyclient communications and confidential 

work-product.248 On the other hand, a 

commenter asserted that while a 

memorandum of law may entail lower 

costs it would not provide sufficient 

accountability, in contrast to an opinion 

of counsel that the commenter believes 

would be a reliable, thorough, and 

formal document that provides a 

distinct level of accountability to the 

firm making the attestation.249

3. Final Rule 

The Commission is adopting rule 

150.4(b)(8) as proposed, but renumbered 

as rule 150.4(b)(7). The Commission 

also adopts the statements from the 

Proposed Rule noted above, including 

the statements as to what constitutes a 

state law, who can prepare the 

memorandum of law, and what must be 

included in such memorandum.250

In response to comments, the 

Commission clarifies that supranational 

laws (such as EU laws) constitute laws 

of a foreign jurisdiction which may be 

a basis for the exemption, if they meet 

the standard of being the basis for a 

reasonable risk of violation arising from 

information sharing. Similarly, the 

Commission’s own regulations may be a 

basis for the exemption if they meet that 

standard. 

Also, the Commission clarifies that 

the memorandum of law supporting an 

exemption may be prepared by an 

employee of the firm, or of an affiliate 

of the firm, that is seeking the 

exemption. However, the Commission 

does not agree with the commenters 

who suggested that a more summary 

document may support an exemption, 

or that a formal opinion of counsel 

should be required. Instead, the 

Commission continues to believe that, 

as stated in the Proposed Rule,251

requiring a formal opinion of counsel 

would be expensive and may not 

provide benefits, in terms of the 

purposes of this requirement, as 

compared to a memorandum of law. The 

Commission expects that a 

memorandum of law submitted in 

support of an exemption will contain 

information sufficient to allow 

Commission staff to review the legal 

basis for the asserted statutory or 

regulatory impediment to the sharing of 

information (particularly where the 

asserted impediment arises from laws or 

regulations that the Commission does 

not directly administer), to consult with 

other federal regulators as to the 

accuracy of the memorandum, and to 

coordinate the development of rules 

surrounding information sharing and 

aggregation across accounts. 

H. Aggregation Requirement for 

Substantially Identical Trading in Rule 

150.4(a)(2) 

1. Proposed Approach 

The Commission first adopted an 

aggregation requirement for 

substantially identical trading in the 

part 151 rules in order to prevent 

circumvention of the aggregation 

requirements.252 In adopting this 

proposal, the Commission explained 

that ‘‘In [the] absence of such 

aggregation requirement, a trader can, 

for example, acquire a large long-only 

position in a given commodity through 

positions in multiple pools, without 

exceeding the applicable position 

limits.’’ 253 The Commission further 

explained that under this provision, no 

ownership threshold would apply and 

positions of any size in accounts or 

pools would require aggregation.254

The Proposed Rule, adopted after the 

part 151 rules were vacated, included a 

similar provision in proposed rule 

150.4(a)(2), noting that the proposed 

rule was intended to be consistent with 

the approach taken in vacated rule 

151.7(d).255

2. Commenters’ Views 

A commenter representing managers 

of registered investment companies said 

aggregation should not be required 

where a common investment adviser 

controls the activities of various 

registered investment companies, so 

long as the investment companies have 

different investment strategies, because 

restructuring of the advisory business to 

obtain an exemption from aggregation 

would impose costs on the shareholders 

in the investment companies.256

Another commenter representing 

investment managers asked the 

Commission to provide further guidance 

on the situations that will be covered by 


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257See CL–AIMA Feb 10. Passively managed 

index funds were cited as an example of pools with 

identical trading strategies in the adoption of rule 

151.7(d). See Position Limits for Futures and 

Swaps, 76 FR at 71654. 

A commenter representing managers of pension 

plans asked for guidance on how to determine if 

two investment vehicles in which an investor holds 

an interest are pursuing ‘‘substantially identical 

trading strategies.’’ See American Benefits Council, 

Inc. on February 10, 2014 (‘‘CL–ABC Feb 10’’). 

258See CL–AIMA Feb 10. 

259See CL–SIFMA AMG Feb 10. 

260See CL–SIFMA AMG Feb 10 and CL–CME Feb 

10. As an alternative, one of these commenters 

suggested that the requirement be limited to 

persons that directly control the trading of positions 

in substantially identical accounts or pools. See 

CL–SIFMA AMG Feb 10. 

261See CL–SIFMA AMG Feb 10 and CL–CME Feb 

10. One commenter provided an example of its 

reading of the requirement, asserting that ‘‘a 

$10,000 investor in two $1 billion commodity index 

mutual funds using the same index may have to 

aggregate the positions in those two $1 billion 

mutual funds’’ because the funds follow 

substantially identical trading strategies. See CL– 

SIFMA AMG Feb 10. This commenter posited that 

the investor would have to implement a compliance 

program to prevent inadvertent violations of the 

position limits rules, which (in addition to 

imposing significant legal and operational 

obstacles) would impose costs many times the 

investor’s $10,000 investment. See id. 

262See CL-Better Markets Feb 10 and Better 

Markets, Inc. on March 30, 2015 (‘‘CL-Better 

Markets Mar 30’’). 263See CL-Better Markets Mar 30 (arguing that 

Congress did not permit the discretion of the 

Commission to apply position limits to allow for an 

‘‘abdication of responsibility’’ to act with respect to 

commodity index traders). 264See CL-Occupy the SEC Aug 7. 265See generally the discussion of rule 150.4(b)(1) 

in part II.I, below. 

266See Proposed Rule, 78 FR at 68959 n 109. 

267See footnote 256. 

268The commenter described the holdings in 

dollar amounts. See CL–SIFMA AMG Feb 10. The 

Commission notes however that the position limits 

generally are stated in terms of a number of 

contracts, not a dollar amount. To apply rule 

150.4(a)(2), a person holding or controlling the 

trading of positions in more than one account or 

pool with substantially identical trading strategies 

must determine the person’s pro rata interest in the 

number of contracts such accounts or pools are 

holding. 

the ‘‘substantially identical trading 

strategies’’ provision, including whether 

the Commission may apply the 

provision to situations other than 

passively managed index funds.257 This 

commenter believed that the aggregation 

requirement should not apply to 

accounts placed in ‘‘separate 

performance composites,’’ and 

suggested that the Commission consider 

using in this rule the term ‘‘trading 

program’’ as defined in rule 4.10(g), 

rather than the term ‘‘trading strategies,’’ 

which is not defined.258 A third 

commenter representing investment 

managers suggested that the 

Commission remove from the rule any 

requirement that a person holding or 

controlling the trading of positions in 

accounts or pools with substantially 

identical trading strategies aggregate 

those positions.259

Two commenters asserted that the 

Commission did not provide a statutory 

or policy rationale for, or consider the 

costs and benefits of, this requirement, 

or provide guidance regarding the 

meaning of ‘‘substantially identical 

trading strategies.’’ 260 Both of these 

commenters asserted that the proposed 

rule would result in an absurd 

consequence requiring a person to 

aggregate all of the positions of two 

single-commodity index funds using the 

same index in which the person 

invested, or in which a fund-of-funds 

manager invested for that person.261

On the other hand, a commenter 

argued that the Commission’s position 

limit aggregation regime should limit 

financial speculation by any group or 

class of traders in a given contract that 

becomes large enough to threaten the 

contract’s ability to serve the needs of 

hedgers.262 This commenter asserted 

that commodity index traders, which 

the commenter believes trade en masse 

with respect to an explicit programmed 

common strategy, are clearly covered by 

the statutory provision on ‘‘two or more 

persons acting pursuant to an expressed 

or implied agreement or understanding’’ 

and these traders must be aggregated for 

position limit purposes.263 Another 

commenter endorsed the view that 

commodity index traders’ positions 

should be aggregated because they 

‘‘operate outside of the normal 

operation of the commodity markets 

[and] sway market prices due to sheer 

volume and for exogenous, non-market 

reasons,’’ so that aggregating their 

positions would significantly reduce 

market speculation and facilitate 

predictable commodities market 

operations.264

3. Final Rule 

The Commission is adopting rule 

150.4(a)(2) substantially as it was 

proposed, but with clarifying changes 

discussed below. The Commission 

continues to believe that this provision 

is necessary to prevent circumvention of 

the aggregation requirements. In this 

regard, the Commission notes, for 

example, that the exemption in rule 

150.4(b)(1) will generally permit limited 

partners, limited members, shareholders 

and other similar types of pool 

participants not to aggregate the 

accounts or positions of the pool with 

any other accounts or positions such 

person is required to aggregate, unless 

certain circumstances specified in rule 

150.4(b)(1) are present.265 As a result of 

this exemption, a person could hold 

significant positions in multiple pools 

without any aggregation requirement, 

which the Commission believes to be 

acceptable so long as the pools do not 

have substantially identical trading 

strategies. However, in the absence of 

rule 150.4(a)(2) the exemption would 

also permit a trader to separate a large 

position in a given commodity 

derivative into positions held in pools 

that have substantially identical trading 

strategies (i.e., the example cited in the 

adoption of vacated regulation 151.7(d)). 

To ensure that this situation is covered 

by the aggregation requirement, rule 

150.4(a)(2) requires that trader to 

aggregate its positions in all pools or 

accounts that have substantially 

identical trading strategies. 

Also, even apart from the exemption 

in rule 150.4(b)(1), a person would (in 

the absence of rule 150.4(a)(2)) generally 

not be required to aggregate positions in 

accounts or pools if those positions are 

below the 10 percent threshold in rule 

150.4(a)(1) and no control is present. 

For this reason, and as was the case in 

vacated regulation 151.7(d), there is no 

ownership threshold in rule 150.4(a)(2), 

so that if the accounts or pools have 

substantially identical trading strategies, 

a person must aggregate its positions in 

the accounts or pools regardless of 

ownership level. Also, as was proposed, 

aggregation under rule 150.4(a)(2) is not 

subject to the exemptions in rule 

150.4(b).266 And, as is stated in the rule, 

aggregation under rule 150.4(a)(2) is 

required if a person either holds 

positions in more than one account or 

pool with substantially identical trading 

strategies, or controls the trading of such 

positions without directly holding them. 

In response to the commenters, the 

Commission disagrees that this 

provision could lead to absurd results. 

In the example described by one 

commenter, where a person has 

holdings of $10,000 each in two 

commodity index funds with 

substantially identical strategies,267 the 

terms of the rule require the owner to 

aggregate the positions that it (i.e., the 

owner) holds in the two commodity 

index mutual funds, not the positions of 

the funds themselves. That is, the two 

holdings would be aggregated into one 

$20,000 holding.268 The owner is not 

required to aggregate all the positions 

held by the two funds. Effectively, it is 

the person’s pro rata interest (held or 

controlled) in each account or pool with 

substantially identical trading strategies 

that must be included in the 

aggregation. 

The Commission also believes that 

proposed rule 150.4(a)(2) was slightly 

unclear when it stated that the person 

‘‘must aggregate such positions’’ 


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269See Proposed Rule, 78 FR at 68963. 

270The Commission stated that this modification 

was 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 

footnote 99, above. 

271A ‘‘4.13 pool’’ is a commodity pool for which 

the relevant CPO has claimed an exemption from 

registration under regulation 4.13. A commenter on 

the proposed amendments to part 151 had 

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. 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 percent of the 4.13 

pool. See Proposed Rule, 78 FR at 68965. 

272See id. 

273See id. 

274See CL–AIMA Feb 10. 

275See CL–OTPP Nov 13; CL–PEGCC Nov 12; CL– 

DBCS Feb 10; CL–SIFMA AMG Nov 13; CL–MFA 

Nov 12; CL–MFA Feb 7. 

276See id. 

277The commenter believes that while the 

requirement to aggregate for pools run by exempt 

CPOs was adopted in 1999 when very few CPOs 

were exempt and there was a concern about small 

pools, this requirement is no longer appropriate 

given the expanded number of exempt CPOs. See 

CL–MFA Nov 12 and CL–MFA Feb 7. 

Another commenter said that passive investors in 

4.13 pools should not be required to aggregate, and 

they should not have to make a filing with the 

Commission as a condition of such disaggregation, 

so that they would be treated the same as 

unaffiliated passive investors in non-exempt pools 

under rule 150.4(b)(1). See CL–SIFMA AMG Nov 13 

and CL–SIFMA AMG Feb 10. 

without stating precisely with what 

such positions must be aggregated. To 

clarify how aggregation under rule 

150.4(a)(2) is to be effected, the 

Commission has modified the last 

clause of the rule so that it reads ‘‘. . . 

must aggregate each such position 

(determined pro rata) with all other 

positions held and trading done by such 

person and the positions in accounts 

which the person must aggregate 

pursuant to paragraph (a)(1) of this 

section.’’ That is, rules 150.4(a)(1) and 

(a)(2) are to be applied cumulatively, so 

that a person must aggregate all 

positions held and trading done by such 

person with all positions that must be 

aggregated pursuant to rule 150.4(a)(1) 

and all positions that must be 

aggregated pursuant to rule 150.4(a)(2). 

I. Exemption for Ownership by Limited 

Partners, Shareholders or Other Pool 

Participants in Rule 150.4(b)(1) 

1. Proposed Approach 

Proposed rule 150.4(b)(1) was 

substantially similar to existing 

regulation 150.4(c). The Commission 

proposed rule 150.4(b)(1) as part of an 

organizational revision intended to 

make rule 150.4 easy to understand and 

apply. In the Proposed Rule, the 

Commission explained that stating this 

provision as the first exemption will 

clarify that this exemption may be 

applied by 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.269

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) are 

satisfied. The text of paragraph (b)(2), in 

turn, states that it applies 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) stated 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) stated explicitly a 

principle that is implicit in the existing 

regulation.270 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 

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

regulation 150.4, but the text of the rule 

was modified to simplify the wording of 

the provisions. 

The Proposed Rule also briefly 

addressed the treatment of 4.13 pools in 

a manner that is equivalent to the 

treatment of operating companies.271

The Commission noted that the 

proposed amendment to the latervacated part 151 regulations had 

proposed to expand the definition of 

independent account controller to 

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 4.13 pools 

established as limited liability 

companies.272 In the Proposed Rule, the 

Commission stated that this is a matter 

that could be the subject of relief 

granted under CEA section 4a(a)(7) and 

that persons wishing to seek such relief 

should apply to the Commission stating 

the particular facts and circumstances 

that justify the relief.273

2. Commenters’ Views 

Commenters did not address the 

proposed reorganization and rephrasing 

of proposed rule 150.4(b)(1). However, 

some commenters addressed the 

substance of the rule, which is the same 

as existing regulation 150.4(c). 

One commenter asked that the 

Commission make the following 

technical changes to the proposed rule: 

Expand the exemption in the rule to 

include the beneficiary of a trust, clarify 

that a ‘‘limited member’’ of a limited 

liability company is any person who is 

not a managing member, construe the 

term CPO to include a person 

discharging the function of CPO (to 

account for situations where the 

function has been delegated from one 

person to another), and confirm that a 

filing generally is not required for relief 

under 150.4(b)(1), with the exception of 

relief under rule 150.4(b)(1)(ii).274

Several commenters said the 

Commission should provide an 

ownership exemption for interests held 

by a limited partner in a commodity 

pool—i.e., the rule should permit 

disaggregation on a showing that the 

limited partner does not control trading 

by the commodity pool (for which the 

CPO is exempt from registration).275

That is, these commenters believed that 

the rule requiring aggregation when a 

limited partner owns more than 25 

percent of a pool (i.e., existing 

regulation 150.4(c)(3)) should be 

modified to allow for disaggregation 

following a filing attesting to no control 

by the limited partner.276

One of these commenters asserted that 

investors holding greater than 25 

percent ownership interests in pools 

often do not have control of the pools’ 

trading (or ability to monitor the pools’ 

positions) and thus would qualify for 

disaggregation under the criteria in 

proposed rule 150.4(b)(2)(i).277 This 

commenter cited a no-action letter 

issued by the staff of the Commission, 

which the commenter interpreted to 

acknowledge that, in the case of a 

manager of a fund of funds, there may 

be a ‘‘lack of visibility . . . regarding the 

positions of an Investee Fund,’’ that 

‘‘such opaqueness’’ may not allow the 

manager to have adequate data to 

determine a position, and when 


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278See CL–MFA Feb 7, citing CFTC No-Action 

Letter No. 12–38 (Nov 29, 2012). 

279See CL–ABC Feb 10. 

280The commenter asserted that managers of 4.13 

pools will be reluctant to provide such information 

because (i) the selective disclosure of fund position 

information to only certain investors could raise 

legal liability issues under the federal securities 

laws; (ii) certain employee benefit plans could 

utilize position information provided by the fund 

to deduce proprietary and confidential investment 

strategies of the advisor/manager to such funds; and 

(iii) the operational burdens associated with the 

fund providing such information to certain 

employee benefit plans, to the extent not legally 

prohibited, may be deemed too costly. See id. 

281See Proposed Rule, 78 FR at 68965. As noted 

above, because the Commission is not adopting 

proposed rule 150.4(b)(3), paragraphs (b)(4) to (b)(9) 

of proposed rule 150.4 are renumbered in the final 

rule as paragraphs (b)(3) to (b)(8), respectively. 

Thus, final rule 150.4(b)(4) corresponds to proposed 

rule 150.4(b)(5). 

282The definition of eligible entity in existing 

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. 

However, with regard to a CPO that is exempt under 

regulation 4.13, the definition of an independent 

account controller in existing 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. 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. See Proposed Rule, 78 FR at 

68964. 

283See Proposed Rule, 78 FR at 68965. 

284A commenter on the proposed amendments to 

part 151 had suggested that this rule 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. 

See id. 

285See CL–OTPP Nov 13. 

286This commenter said that the phrase 

‘‘commodity pool the operator of which is excluded 

from registration’’ should be deleted from proposed 

rule 150.1(e)(5)(ii) and replaced by the following 

text from proposed rule 150.1(d): ‘‘trading vehicle 

which is excluded, or which itself has qualified for 

exclusion from the definition of the term ‘pool’ or 

‘commodity pool operator,’ respectively.’’ See CL– 

AIMA Feb 10. 

287This commenter said that disaggregation relief 

should be available to an affiliate which operates 

as a Registered Fund Management Company in 

Singapore managing non-U.S. client accounts 

holding U.S. futures, options and swaps and, thus, 

is not subject to U.S. registration requirements. See 

Olam International Limited on February 10, 2014. 

288See CL–AIMA Feb 10 and CL–ICI Feb 10. 

289See CL–MFA Nov 12. 

290See CL–FIA Feb 6 and Commercial Energy 

Working Group on March 30, 2015. 

291See CL–ABC Feb 10 and CL–SIFMA AMG Nov 

13. 

investment managers of underlying 

investee funds provide full position 

data, such data is rarely made available 

on a real-time basis.278

A commenter representing managers 

of pension fund investments believed 

that it is unclear whether proposed rule 

150.4(b)(1)(iii) was meant to require a 

passive investor that holds a 25 percent 

or greater ownership interest in a 4.13 

pool to aggregate the pool’s positions.279

The commenter felt that the 

Commission had not provided any 

rationale for, or evaluated the costs of, 

such a requirement, with which 

compliance would be impractical, if not 

impossible.280

3. Final Rule 

The Commission is adopting rule 

150.4(b)(1) as it was proposed. In 

response to a commenter, the 

Commission notes that rule 150.4(c), as 

was the case for the proposed rule, 

requires a filing to claim an aggregation 

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

but not the other subparagraphs of 

paragraph (b)(1). 

The commenters’ other discussion of 

this rule goes beyond the scope of the 

proposal, because no substantive 

changes to the rule were proposed. 

Rather, this rule was included in the 

proposal as part of the reorganization of 

rule 150.4. 

The question in the proposal about 

treating 4.13 pools the same as operating 

companies was accompanied by a 

statement that ‘‘this is a matter that 

could be the subject of relief granted 

under CEA section 4a(a)(7).’’ That is, 

this question requested comment on the 

circumstances that could justify relief 

that may be granted in the future under 

CEA section 4a(a)(7). 

J. Exemption for Accounts Carried by an 

Independent Account Controller in Rule 

150.4(b)(4) and Conforming Change in 

Rule 150.1 

1. Proposed Approach 

The Commission proposed rule 

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

existing IAC provision in existing 

regulation 150.3(a)(4) (which was 

proposed to be deleted).281 The 

Commission also proposed conforming 

changes to the definition of the term 

‘‘eligible entity’’ in proposed rule 

150.1(d) and (e). Existing 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 

IACs.282 The Commission stated that the 

reason for this organizational change 

was to place the IAC exemption in the 

regulatory section providing for 

aggregation of positions.283 Proposed 

rule 150.4(b)(5) was substantially 

similar to existing regulation 150.3(a)(4) 

except that the Commission proposed to 

modify it (and the related definition in 

proposed rule 150.1(d)) 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.284

2. Commenters Views’ 

Commenters did not address the 

proposed reorganization and rephrasing 

of proposed rule 150.4(b)(5). However, 

some commenters addressed the 

substance of the rule, which is the same 

as existing regulation 150.3(a)(4). 

Several commenters asked that the 

Commission expand the definition of 

the term ‘‘eligible entity’’ to include a 

variety of different entities, such as: 

• The operators of certain similar 

investment vehicles, such as 

governmental or pension-sponsored 

investment management vehicles; 285

• non-corporate entities that sponsor 

plans, such as governmental plans or 

church plans; 286

• foreign entities that perform a 

similar role or function subject to 

foreign regulation; 287

• exempt CTAs, and all registered, 

exempt or excluded CPOs; 288

• a CPO exempt from registration; all 

operators excluded from the definition 

of CPO; a limited partner, a limited 

member, shareholder or other pool 

participant of a pool whose operator is 

either registered or exempt from 

registration; a CTA that is exempt from 

registration; a person excluded from the 

definition of CTA; and a general partner, 

managing member or manager of a 

commodity pool whose operator is 

either registered, exempt from 

registration, or excluded from the 

definition of CPO.289

Two commenters suggested that the 

definition of the term ‘‘eligible affiliate’’ 

should include sister companies, 

consistent with the definition of the 

term ‘‘eligible affiliate counterparty’’ 

under existing regulation 50.52, because 

the proposed definition does not appear 

to cover sister affiliates in a corporate 

group where neither affiliate holds an 

ownership interest in the other.290

Another two commenters suggested the 

deletion of the proposed filing 

requirement for the IAC exemption in 

proposed rule 150.4(c)(1), because, they 

argued, no filing has been necessary to 

rely on the IAC exemption, and the 

Proposed Rule provides no justification 

for deviating from this established 

practice.291

Last, a commenter argued that the 

Commission provided no rationale for 

the proposed amendments to the IAC 

exemption, and asserted that since at 

least 1999 the IAC exemption is not 

limited to ‘‘customer’’ positions traded 

by IACs but rather is available to limited 


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292See CL–CME Feb 10. 

293Rule 150.1(e)(2), as adopted, reflects two 

grammatical corrections: The phrase ‘‘fiduciary 

responsibilities to the managed positions and 

accounts’’ is corrected to read ‘‘fiduciary 

responsibilities for managed positions and 

accounts’’ and the word ‘‘is’’ is added before the 

second usage of the word ‘‘consistent.’’ 

Rule 150.4(b)(4)(i)(A), as adopted, reflects the 

deletion of the phrase ‘‘document routing and other 

procedures or’’ for consistency with rule 

150.4(b)(2)(i)(C). See footnote 164, above. 

294See existing regulations 4.5(a)(4)(iii) and 

4.5(a)(4)(v), respectively. 

295The Commission notes that commenters have 

suggested that registered CPOs and exempt CTAs 

should be included in the definition of the term 

‘‘eligible entity’’ and the definition should clarify 

the treatment of certain persons who are exempt 

from registration as CPOs. The Commission is 

considering these comments and may take them up 

in a later proceeding. 

296See 1999 Amendments, 64 FR 24038 at 24045. 

297See Proposed Rule, 78 FR at 68953. 

298See id. The textual modifications in the 

Proposed Rule related to the Commission 

regulations currently in effect. The Commission 

noted that its proposal regarding position limits 

includes amendments to the text of certain 

Commission regulations (See Position Limits for 

Derivatives, 78 FR 75680 (Dec. 12, 2013)) and that 

if the later proposal is adopted, conforming 

technical changes to reflect the interplay between 

the two amendments may be necessary. 

299See Proposed Rule, 78 FR at 68963. 

partners who may be affiliates or 

principals of an owned-CPO.292

3. Final Rule 

The Commission is adopting rules 

150.1(d) and (e) and rule 150.4(b)(5) as 

they were proposed, but proposed rule 

150.4(b)(5) is renumbered as 

150.4(b)(4).293 Regarding the comments 

that the term ‘‘eligible entity’’ should 

include entities such as the operators of 

governmental or church plans, the 

Commission notes that rule 150.1(d) 

defines the term to include 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, and 

existing regulation 4.5 has exclusions 

from the definition of ‘‘pool’’ for 

governmental plans and church 

plans.294 Thus, operators of such trading 

vehicles would be eligible entities. 

The commenters’ discussion of 

proposed rule 150.4(b)(5) (final rule 

(150.4(b)(4)) goes beyond the scope of 

the proposal. As proposed, this 

paragraph replaced the existing IAC rule 

in existing regulation 150.3(a)(4), except 

that it was expanded to include any 

person with a role equivalent to a 

general partner in an limited 

partnership or managing member of a 

limited liability company. The 

Commission did not propose any other 

changes to the definitions of eligible 

entity or IAC. Other changes to this 

regulation would be a matter for future 

consideration.295

The Commission believes that the 

existing IAC exemption, the substance 

of which is included in the final rule, 

is consistent with the CEA and prior 

Commission precedents. In this regard, 

it is important to distinguish between 

the exemption in existing regulation 

150.4(c)(2) (e.g., for a limited partner of 

a CPO who is also a principal or affiliate 

of the CPO) and the IAC exemption in 

existing regulation 150.3(a)(4). These 

two distinct exemptions are 

incorporated into the final rule as rules 

150.4(b)(1)(ii) and (b)(4), respectively. 

Thus, the comment implying that 

Commission precedent has not limited 

the IAC exemption to ‘‘customer’’ 

positions traded by IACs is misplaced. 

The discussion cited by the commenter 

related to the definitions of the terms 

‘‘eligible entity’’ and ‘‘IAC’’ and was 

codified in existing regulation 

150.4(c)(2); this precedent did not relate 

to the exemption language in existing 

regulation 150.3(a)(4).296

Regarding the potential for 

aggregation between ‘‘sister affiliates’’ 

where neither affiliate holds an 

ownership interest in the other, the 

Commission notes that an entity 

generally would not require relief in this 

situation because aggregation is required 

only when one entity owns an interest 

in, or controls, the other. Last, the 

definition of the term ‘‘eligible affiliate’’ 

is not part of the Proposed Rule and so 

comments on this definition are not 

germane to this rulemaking. 

K. Revisions To Clarify Regulations 

1. Proposed Approach 

In connection with the proposed 

modifications to rule 150.4, the 

Commission reviewed whether the text 

of existing regulation 150.4 is easy to 

understand and apply. In this regard, 

the Commission noted 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.297 Also, as more market 

participants active in different parts of 

the market have studied existing 

regulation 150.4, 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 

believed 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. The textual 

modifications in the proposed rule were 

not intended to effect any substantive 

change to the meaning of rule 150.4.298

Therefore, the Commission proposed 

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 believed 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.299

Proposed rule 150.4(b)(1) stated 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). Proposed rule 150.4(b)(2) and 

proposed rule 150.4(b)(3) set out 

exemptions permitting disaggregation of 

the positions of owned entities in 

certain circumstances. 

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

rule 150.4 (renumbered as paragraphs 

(b)(3) to (b)(7) of the final rule) set forth 

other exemptions that may apply in 

various circumstances. The exemption 

for certain accounts held by FCMs in 

paragraph (b)(4) of the proposed rule 

(final rule (b)(3)) was substantially the 

same as existing regulation 150.4(d), 

except that it was 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) of 

the proposed rule (final rule (b)(4)) set 

forth the exemption for accounts carried 

by an IAC that was substantially similar 

to existing regulation 150.3(a)(4). 

Paragraphs (b)(6), (b)(7) and (b)(8) of the 

proposed rule (final rule paragraphs 

(b)(5), (b)(6) and (b)(7), respectively) set 

forth the exemptions for underwriting, 

broker-dealer activity and circumstances 

where laws restrict information sharing. 

Paragraph (b)(9) of the proposed rule 

(final rule (b)(8)) described how highertier entities may apply an exemption 

pursuant to a notice filed by an owned 

entity. 


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300See Position Limits for Derivatives, 78 FR 

75680 (December 12, 2013). 

301 7 U.S.C. 19(a). 

302 17 CFR part 150. 

303 17 CFR 150.1 and 150.4. See Aggregation of 

Positions; Proposed Rule, 78 FR 68946 (Nov. 15, 

2013) (‘‘Proposed Rule’’). 

304See Aggregation of Positions: Supplemental 

notice of proposed rulemaking, 80 FR 58365 (Sept. 

29, 2015) (‘‘Supplemental Notice’’). 

305 17 CFR part 150. 

306See Proposed Rule, 78 FR at 68946; 

Supplemental Notice, 80 FR at 58374 (for a 

discussion of the baseline). 

307See 17 CFR 150.4(a) and (b). 

308See 17 CFR 150.4(c). 

309See 17 CFR 150.4(d). 

310See 17 CFR 150.3(a)(4). 

311See Proposed Rule, 78 FR at 68972, and 

Supplemental Notice, 80 FR at 58375. 

312See CL-Working Group Feb 10; CL–CME Feb 

10; CL–SIFMA AMG Feb 10; CL–FIA Feb 6; CL–FIA 

Nov 13; CL–COPE Feb 10. Also, the Proposed Rule 

included a discussion of comments on costs related 

to the now-vacated Part 151 received prior to the 

2013 proposal. See Proposed Rule, 78 FR at 68971. 

313See rules 150.4(b)(1), (b)(3) and (b)(4), 

respectively. See also existing regulations 150.4(c), 

150.4(d) and 150.3(a)(4), respectively. 

314See rule 150.4(b)(2). 

315See rules 150.4(b)(5) and (b)(6), respectively. 

316See rule 150.4(b)(7). 

2. Commenters’ Views and Final Rule 

No commenters raised any problems 

or issues arising from these 

organizational changes, so they are 

reflected in the final rule adopted by the 

Commission. 

Finally, it should be noted that the 

amendments to part 150 adopted here 

may require further conforming 

technical changes if the Commission 

adopts any proposed amendments to its 

regulations regarding position limits.300

Such changes would be explained at the 

time they are adopted. 

III. Related Matters 

A. Considerations of Costs and Benefits 

Section 15(a) of the CEA 301 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. 

As discussed in Section I 

(Background), above, the Commission 

proposed amendments to its existing 

aggregation rules.302 In November 2013, 

the Commission proposed amendments 

to existing regulations 150.1 and 

150.4.303 In response to commenters, the 

Commission issued a supplemental 

notice in September 2015 to modify one 

of the proposed exemptions to the 

Commission’s proposed aggregation 

requirement.304 The modification 

changed the exemption category that 

was tied to ownership and equity levels. 

In the main, the Commission is adopting 

all of the changes identified in the 

Proposed Rule, as modified by the 

Supplemental Notice. The Commission 

believes that the final rules are a 

reasoned approach to complying with 

CEA section 4a(a)(1)’s aggregation 

requirement. The Commission also 

believes that the final rules, via 

exemptions, give market participants 

opportunities and processes to reduce 

costs and burdens associated with 

aggregating positions that might hinder 

trading or reduce liquidity. 

Current part 150 is the baseline 

against which the costs and benefits 

associated with these final rules will be 

identified and considered.305 The 

current regulations in part 150 require 

certain market participants to aggregate 

positions subject to the position 

limits.306 As discussed above in Section 

II., the Commission’s aggregation policy 

under existing regulation 150.4 

generally requires that unless a 

particular exemption applies, a person 

must aggregate all positions and 

accounts for which that person controls 

the trading decisions with all positions 

and accounts in which that person has 

a 10 percent or greater ownership 

interest, and with the positions of any 

other persons with whom the person is 

acting pursuant to an express or implied 

agreement or understanding.307 There 

are several exemptions from aggregation 

listed, such as the ownership interests 

of limited partners in pooled 

accounts,308 discretionary accounts and 

customer trading programs of FCMs,309

and eligible entities with IAC that 

manage customer positions.310

In the Proposed Rule and the 

Supplemental Notice, the Commission 

also requested comments on its costsand-benefits assessments and sought 

data as well as other information in the 

estimation of quantifiable costs and 

benefits of the final changes to part 

150.311 The commenters addressed the 

cost-and-benefit aspect of the Proposed 

Rule and the Supplemental Notice in a 

general manner; commenters did not 

provide data.312 Accordingly, since the 

data requisite to quantification is byand-large proprietary, specific to 

individual market participants, and not 

otherwise reasonably accessible to the 

Commission, the Commission’s costand-benefit discussion that follows is 

largely qualitative in nature. The 

Commission, nevertheless, attempts to 

quantify costs and benefits where 

possible, especially, in the area of 

market participants’ filing exemption 

notices. 

1. Final Rules—Summary 

The Commission is adopting final 

rules that, primarily, have two 

objectives. First, the final rules state the 

Commission’s aggregation requirement. 

Second, the final rules identify 

exemptions that relieve market 

participants from the requirement to 

aggregate all held positions that are 

subject the Commission’s position 

limits. 

Final rules 150.4(a)(1) and (a)(2) set 

out two aggregation requirements: (1) 

An aggregation requirement for a person 

exercising trading control or possessing 

certain ownership or equity interests in 

positions in accounts, which is the same 

as in existing regulation 150.4(b); and 

(2) an aggregation requirement for a 

person who holds or controls positions 

in more than one account that employ 

substantially identical trading strategies, 

which is new under the final rule. The 

exemptions are in rules 150.4(b)(1) to 

(b)(8), and apply only to persons who 

fall within the first category of persons 

who must aggregate—i.e., persons 

subject to rule 150.4(a)(1). The 

exemption notice filing process is in 

rules 150.4(c) and (d). In rule 150.4(e), 

the Commission delegates authority 

over aggregation and exemption related 

duties to the Director of the Division of 

Market Oversight. 

There are eight exemptions. Three of 

them are largely the same as in existing 

regulations: An exemption for limited 

partners, shareholders, or other pool 

participants; an exemption for FCMs 

that hold certain accounts; and an 

exemption for independent account 

controllers that control trading by 

certain accounts or positions.313 Five of 

the exemptions are new in the final rule. 

There is an exemption from aggregation 

of the positions and accounts of owned 

entities if the owner meets certain 

conditions intended to ensure 

independence of trading.314 There is 

exemptive relief for persons who hold 

positions or accounts for the purpose of 

underwriting, and for certain brokerdealers.315 There also is a violation-oflaw exemption for persons who must 

not share trading information to avoid 

violating state or federal laws, or the law 

of a foreign jurisdiction.316 Finally, 


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317See rule 150.4(b)(8). 

318See rule 150.4(c)(1). 

319See rules 150.4(c)(1)(i), (ii) and 150.4(b)(2)(ii). 

320These factors apply to the owned entity to the 

extent that the owner is or should be aware of the 

activities and practices of the owned entity. The 

factors also apply to any other entity that the owner 

must aggregate, again to the extent the owner is or 

should be aware of its activities and practices. See 

rule 150.4(b)(2). 

there is an exemption that relieves 

persons who are affiliated with a person 

who has already filed an exemption 

notice from filing a duplicative 

exemption notice with the 

Commission.317

Persons seeking an exemption under 

most, but not all, of the exemptive 

categories must file a notice with the 

Commission to obtain relief from the 

aggregation requirement. Persons 

required to file a notice include the 

following: Certain principals or affiliates 

of commodity pool operators; persons 

with ownership or equity levels of 10 

percent or greater; independent account 

controllers, and persons who do not 

share trading information to avoid 

violating laws.318 The notice must 

describe the relevant circumstances that 

warrant disaggregation, and have a 

senior officer’s certification.319 The 

relevant circumstances that may warrant 

disaggregation are described in rule 

150.4(b)(2)(i)(A)–(E) and include the 

following four factors for the owner 

entity and the owned entity: 320 Lack 

trading-decision knowledge; trade 

through separately developed and 

independent trading systems; possess 

and enforce written procedures to 

preclude each from having knowledge 

of, gaining access to, or receiving data 

about, trades of the other; do not share 

employees that control the trading 

decisions of the owned entity or owner; 

and do not have a risk management 

system that permits the sharing of trades 

or trading strategy. 

The Commission also is finalizing 

definition changes to the term ‘‘eligible 

entity’’ in rule 150.1(d), and 

‘‘independent account controller’’ in 

rule 150.1(e). These changes reorganize 

where the defined terms are located in 

the Commission’s regulations, and 

clarify that they apply not only to 

limited partnerships (as in the existing 

regulation), but also to limited liability 

companies and other equivalent 

corporate structures. The Commission 

believes that these definition changes, 

in and of themselves, have no costbenefit concerns; their cost-benefit 

impact relates to implementing the 

exemptions. 

2. Benefits 

The purpose of requiring positions to 

be aggregated among affiliated and 

otherwise connected entities is to 

prevent evasion of prescribed position 

limits through coordinated trading. 

Because the same reasoning applies to a 

person who holds or controls positions 

in more than one account or pool with 

substantially identical trading strategies, 

the final rule includes a new provision 

to require aggregation in these 

circumstances. The Commission 

believes that the new requirement to 

aggregate positions under substantially 

identical trading strategies will provide 

benefits by helping to prevent evasion of 

the position limits. 

The Commission also recognizes that 

an overly restrictive or prescriptive 

aggregation policy may result in 

unnecessary burdens or unintended 

consequences. Therefore, the final rule 

adopts five new exemptions from the 

aggregation requirement, as described 

above. The Commission believes that 

providing these exemptions will 

mitigate these burdens and 

consequences in situations where the 

risks of coordinated trading are low. 

Thus, the Commission believes the final 

rule provides benefits to market 

participants who would have been 

subject to such burdens and 

consequences, while at the same time 

maintaining an aggregation requirement 

that is sufficient to maintain the benefit 

of preventing evasion. 

The unnecessary burdens and 

unintended consequences that could 

arise from an overly restrictive or 

prescriptive aggregation policy could 

take the form of reduced liquidity 

because the imposition of aggregation 

requirements on entities that are not 

susceptible to coordinated trading 

would restrict their ability to trade 

commodity derivatives contracts if the 

aggregation requirements brought them 

close to the applicable limits. The 

Commission also recognizes that 

requiring passive investors to aggregate 

their positions may potentially diminish 

capital investments, or interfere with 

existing decentralized business 

structures. 

The following example illustrates 

how the final rule is expected to provide 

benefits by allowing new exemptions to 

the aggregation requirement. In this 

example, Entity A seeks to pursue a 

business or investment strategy that 

involves the use of futures transactions. 

Before proceeding, Entity A must 

consider whether the futures 

transactions would cause it to exceed 

any applicable position limit. Under the 

aggregation requirement in current 

regulations, which has only limited 

exceptions, Entity A’s decision of 

whether to proceed could depend on the 

futures transactions of its subsidiaries or 

other entities whose positions it is 

required to aggregate. If one such entity 

has significant positions in place, then 

Entity A may be prevented from 

entering into the desired transactions, 

because the aggregation of Entity A’s 

positions with the positions of the other 

entity would exceed a position limit. 

The final rules permit Entity A to seek 

disaggregation relief for the positions of 

certain of its subsidiaries and 

potentially other entities. Thus, under 

the final rules Entity A will have more 

flexibility to put in place a management 

structure that allows Entity A to make 

business and investment decisions 

independently of its subsidiaries and 

other potentially aggregated entities so 

long as applicable criteria (which relate 

to independent decision making and 

other indications of separateness) are 

met. This is beneficial to Entity A 

because it can focus its business and 

investment decisions on its own 

business needs. If disaggregation relief 

were not available to Entity A, then the 

requirement to aggregate other entities’ 

positions might unnecessarily distort 

Entity A’s business and investment 

decisions by requiring Entity A to 

consider factors that do not relate 

directly to those decisions. So by 

establishing exemptive relief that is 

available to market participants that 

take steps to establish independent 

decision making and separateness—for 

instance, the demonstration of no 

shared control over trading—potential 

negative effects, such as impediments to 

sound decision making, will be reduced. 

The exemptions added by the final 

rules also will benefit market 

participants by mitigating their 

compliance burdens associated with 

meeting the aggregation requirement as 

well as position limits more generally. 

Eligible market participants will not 

have to establish and maintain the 

infrastructure necessary to aggregate 

positions across affiliated entities where 

an exemption is available. Further, an 

eligible entity with legitimate hedging 

needs and whose aggregated positions 

are above the position limits thresholds 

in the absence of any exemption will 

have the option of applying for an 

aggregation exemption (if it meets the 

stated criteria) instead of applying for a 

bona fide hedging exemption. In other 

words, an eligible entity will have the 

benefit of being able to choose the 

exemption it deems appropriate, and in 

many cases the exemption from 

aggregation, which requires only a 

notice filing, may be less costly to 


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321See Position Limits for Derivatives, 78 FR 

75680 (December 12, 2013). 

322See generally Proposed Rule, 78 FR at 68970, 

and Supplemental Notice, 80 FR at 58375. 

323The Commission notes that market 

participants that are currently subject to the 

aggregation requirement in the existing regulations 

should have already a system in place for 

aggregating positions across owned entities or as 

otherwise required. Further, entities that have been 

transacting in futures markets have been subject to 

these aggregation requirements for decades, and 

have extant operational structures that are 

appropriate for their trading and other activities. 

Given these considerations, the Commission 

believes that for market participants that are 

currently subject to position limits (and, 

potentially, the aggregation requirement) prior to 

any adoption of new position limits, these final 

rules do not increase significantly the costs of 

compliance as compared to the status quo—that is, 

the aggregation requirements of existing part 150 of 

the Commission’s regulations. 

324The adoption of the proposed position limits 

for 28 exempt and agricultural commodity futures 

and options contracts and the physical commodity 

swaps that are economically equivalent to such 

contracts would be pursuant to the requirements of 

CEA section 4a(a)(5). See Position Limits for 

Derivatives, 78 FR 75680 (December 12, 2013). 

Thus, costs resulting from this statutory 

requirement and not the Commission’s discretion 

are not subject to the consideration of costs and 

benefits required by CEA section 15(a). The costs 

and benefits attributable to the specific position 

limit levels that may be adopted by the Commission 

would be considered in the rulemaking establishing 

those limits. 

325See footnote 118 and accompanying text, 

above. 

obtain than other exemptions from 

position limits. 

The final rules also provide legal 

consistency for those persons that own 

multiple entities with multiple 

ownership or equity interest levels. 

Because the final rules treat all persons 

that possess at least a 10 percent 

ownership or equity interest in another 

entity (other than persons with an 

interest in a pooled account subject to 

rule 150.4(b)(1)) in the same way for 

purposes of receiving exemptive relief 

from the Commission’s aggregation 

requirement, there is a unified 

exemptive framework. This will reduce 

confusion and further mitigates the 

burdens facing market participants. 

Consider, for example, a parent-holding 

company that has different levels of 

ownership or equity interest in its 

various subsidiaries. Under the final 

unified framework, it may establish and 

maintain one notice-filing system for the 

purpose of obtaining aggregation 

exemptions for any or all of these 

subsidiaries. 

The Commission also has reduced, 

consistent with regulatory objectives, 

the administrative and compliance 

burden of filing the notice required to 

receive an exemption. For example, for 

the violations-of-law exemption, the 

Commission will allow a memorandum 

of law prepared by internal counsel 

instead of a formal opinion. This 

reduces legal costs and is a benefit 

available to market participants. Finally, 

the Commission recognizes the benefits 

of notice filing. This will result in 

reduced administrative and compliance 

costs given that updates will be 

necessary only when there are material 

changes. 

3. Costs 

The Commission recognizes that 

entities subject to the Commission’s 

aggregation policy in rule 150.4, 

including entities seeking to apply one 

of the existing or newly-provided 

exemptions, will incur direct costs. 

Such costs will include: (i) Initially 

determining which owned entities, 

other persons, or transactions qualify for 

any of the exemptions from aggregation 

in rule 150.4(b); (ii) developing and 

maintaining a system of determining the 

scope of such exemptions over time; (iii) 

potentially amending current 

operational structures to achieve 

eligibility for such exemptions; (iv) 

preparing and filing notices of 

exemption with the Commission; and 

(v) developing a system for aggregating 

positions across entities, persons or 

transactions for which no exemption is 

available. 

The Commission has also considered 

whether its proposed amendments 

expanding position limits 321 would 

result in an increase in the number of 

market participants that will have to 

consider the effects of the Commission’s 

aggregation policy, as compared to the 

number of market participants that are 

currently subject to position limits and 

potentially subject to aggregation.322 If 

the proposed position limits are 

adopted, market participants would be 

required to aggregate the accounts and 

positions of owned entities and other 

aggregated entities that engage in the 

contracts and swap equivalents covered 

by the new position limits. Thus, the 

Commission’s adoption of the proposed 

position limits would mean that the 

aggregation requirement in the final rule 

(even though it largely continues the 

aggregation requirement in the existing 

regulations) would apply to new market 

participants who have not previously 

been subject to position limits or the 

aggregation requirement.323 The 

Commission has considered the costs 

that these market participants will face. 

Many of these costs—such as building 

out new compliance systems—would be 

attributable to complying with position 

limits that may be adopted in the future 

and not with the final rule adopted 

here.324 However, the Commission has 

considered that as market participants 

become subject to position limits or 

subject to position limits applicable to 

a wider scope of their derivatives 

activities, the market participants may 

face more complex situations involving 

owned entities or other entities 

potentially subject to the aggregation 

requirement. For example, if the scope 

of the position limits expands, 

interpretation and application of the 

criteria for disaggregation relief in rule 

150.4(b)(2) may become more complex, 

even though these criteria are largely the 

same as criteria previously applied with 

respect to the exemption used by 

eligible entities using an IAC.325 The 

Commission has considered the 

potential for these costs but cannot 

quantify them, because the costs that 

would be incurred by each market 

participant will depend upon its 

management and corporate structure, its 

trading practices, its informationsharing practices and other factors 

specific to the market participant. 

The Commission has also considered 

that a large part of the final rule (in 

particular, paragraphs (2), (5), (6) and (7) 

of rule 150.4(b)) adds potential 

exemptions from the aggregation 

requirement that were not available 

under the existing regulations. While 

market participants may incur some 

costs in determining whether to use 

these newly-available exemptions and 

in filing the related notices, the market 

participants are also free not to use the 

exemptions if the costs of doing so are 

too high. In other words, if the costs 

attributable to paperwork and 

compliance practices that are necessary 

to take advantage of one of these 

exemptions do not make economic 

sense, market participants will not avail 

themselves of the exemptions under this 

rulemaking. 

The Commission understands that 

there will be some costs to investors in 

commodity pools in aggregating 

positions under rule 150.4(a)(2), which 

is a newly adopted requirement to 

aggregate the positions of accounts or 

pools with substantially identical 

trading strategies. First, investors may 

not be able to easily determine which 

positions are held by a particular pool. 

Furthermore, the investors may not be 

able to easily determine their percentage 

ownership or equity interest in a pool 

that is open-ended and allows investors 

to continuously buy and redeem shares. 

The Commission is unable to quantify 

the effect of this rule because there are 

varying factors such as complicated 

trading strategies and changing 

ownership levels within a pool. 

Nonetheless, the Commission 

recognizes that there will be costs 


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326See CL-Working Group Feb 10. 

associated with the aggregation 

requirement of this rule. 

In addition, DCMs and SEFs will be 

required to conform their aggregation 

policies, if their rules do not conform to 

the Commission’s aggregation policy 

already. As noted above, the 

requirement to aggregate the positions of 

accounts or pools with substantially 

identical trading strategies, as well as 

the potential application of the 

aggregation requirement to a broader 

scope of positions and market 

participants, may increase the 

complexity of applying the aggregation 

requirement. The Commission 

recognizes that this complexity may 

increase costs for DCMs and SEFs to 

enforce their aggregation policies, but 

for the reasons noted above the 

Commission cannot quantify these costs 

at this time. The actual costs will 

depend on, among other things, the 

extent to which market participants may 

become subject to position limits and 

the characteristics of their corporate 

structures and trading practices. On the 

other hand, the Commission 

understands that some DCMs have made 

conforming rule changes already. In 

these cases, there are no incremental 

costs to consider. 

The Commission believes that the 

final rules will decrease costs by 

providing market participants new 

options to elect an exemption and 

obtain relief from the aggregation 

requirements. Consequently, the main 

direct costs associated with the changes 

to rule 150.4, relative to the standard of 

existing regulation 150.4, will be those 

incurred by entities as they determine 

whether they may be eligible for the 

final exemptions, if they modify their 

management or corporate structures or 

trading practices to comply with the 

exemptions, and if they make 

subsequent exemption filings for 

material changes. These costs will apply 

to market participants that pursue 

exemptions because they are a principal 

or affiliate of an operator of a pooled 

account; person with a 10 percent or 

greater owner or equity interest in 

another entity; a certain type of FCM; a 

certain type of independent account 

controller; or a person who must share 

information to avoid a violation of law. 

The Commission believes there will 

be insignificant costs, if any, for persons 

electing to take the underwriting and 

broker-dealer exemptions. These groups 

are not required to file exemption 

notices under rule 150.4(c). As a result, 

the cost these persons will incur will be 

those dedicated to determining whether 

they are eligible for the exemption. 

There also will be a cost-savings to 

entities affiliated with an entity who has 

already filed for an exemption under 

existing regulation 150.4. The 

Commission has offered affiliated 

entities greater relief by affording them 

an opportunity under rule 150.4(b)(8) to 

reduce administrative costs because 

they will not need to file a notice if their 

affiliated entity has filed an exemption 

notice previously and updates the 

previous filing to include the affiliated 

entities. While there will be some 

associated costs to monitor records of 

notices filed by affiliated entities and 

make the updates, the Commission 

expects those costs will be small and 

will likely decline over time as tracking 

systems are maintained and automated. 

In short, the direct costs of the final 

rules are difficult to quantify in the 

aggregate because such costs are heavily 

dependent on each entity’s 

characteristics. In other words, costs 

vary according to an entity’s current 

systems, its corporate structure, its use 

of derivatives, the specific modifications 

it will implement in order to qualify for 

an exemption, and other circumstances. 

The Commission, nevertheless, believes 

that market participants will choose to 

incur the costs of qualifying for and 

using the exemptions in the final rules 

when doing so is less costly than 

complying with position limits. Thus, 

by providing these market participants 

with a lower cost alternative (i.e., 

qualifying for and using the exemptions) 

the final rules may ease overall 

compliance burdens resulting from 

position limits. 

There is an inherent trade-off between 

the benefits arising from aggregation 

exemptions in certain circumstances 

and maintaining the effectiveness of the 

Commission’s position limits. The 

Commission believes that it has tailored 

the exemptions sufficiently to 

circumstances where the exemptions 

should not weaken the integrity of the 

Commission’s position limits 

significantly, because, for instance, the 

exemptions apply only to accounts that 

pose a low risk of coordinated trading. 

In accordance with the Paperwork 

Reduction Act the Commission has 

estimated the costs of the paperwork 

required to claim the final exemptions. 

As stated in Section III.C., below, the 

Commission estimates that 240 entities 

will submit a total of 340 responses per 

year and incur a total burden of 6,850 

labor hours at a cost of approximately 

$1,096,000 annually to claim exemptive 

relief under regulation 150.4. 

The Commission also considers the 

cross-border implications of this 

rulemaking. The Commission believes 

that the costs might be slightly higher 

for entities that conduct business in 

both domestic and foreign jurisdictions. 

Multi-jurisdictional entities will likely 

need to consider the implications of 

memoranda of understanding between 

the Commission and foreign regulators 

as well as non-U.S. privacy laws that 

might apply to them. The Commission 

believes, however, that while there may 

be costs for initial assessments, these 

costs will decline over time for entities 

as they gain more experience with the 

aggregation requirements discussed 

herein. 

4. Comments 

The Commission received several 

comments on cost-benefit issues in 

response to the Proposed Rule and the 

Supplemental Notice. One commenter 

argued that market participants faced 

the burden of building compliance 

systems and programs to (i) capture the 

information necessary to determine 

whether they may exceed position 

limits and (ii) avoid violating such 

limits on an intraday basis. The 

commenter believed that the number of 

potential market participants at risk of 

violating limits ‘‘is likely significantly 

larger’’ than the number of those who 

actually exceed limits, and the 

obligation to aggregate where there is 

currently no information sharing 

increases costs associated with 

aggregation.326

As noted above, the Commission has 

considered that the requirement to 

aggregate the positions of accounts or 

pools with substantially identical 

trading strategies, along with the 

potential application of the aggregation 

requirement to a broader scope of 

positions and market participants, may 

increase the complexity of applying the 

aggregation requirement. On the other 

hand, the Commission believes that it is 

important to continue to apply the 

aggregation requirement in the existing 

regulation (and to add the aggregation 

requirement related to substantially 

identical trading) in order to forestall 

evasion of the position limits through 

coordinated trading and to close 

potential loopholes, as discussed above. 

To the extent a market participant 

incurs costs in determining whether to 

seek an exemption or to comply with an 

exemption provided in the final rule, 

the market participant could avoid those 

costs if they are not sensible in relation 

to the benefits of using the exemption. 

Another commenter asserted that the 

Commission’s cost-benefit consideration 

of the proposed aggregation rules was 

inadequate, including for investors 

applying the substantially identical 

trading strategies aggregation 

requirement in rule 150.4(a)(2) to their 


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327See CL–CME Feb 10. 

328See Proposed Rule, 78 FR at 68956, n. 103. 

329See CL–SIFMA AMG Feb 10. 

330See id. 

331See id. 

332See the discussion in Section II.A.3, above. 

333The Commission believes that the newly 

added exemption in rule 150.4(b)(2) will also 

mitigate the concerns that this commenter 

expressed about undue costs on passive investors 

that have no control over or knowledge of the 

commodity derivatives trading activities of the 

owned entities in which they invest. See CL– 

SIFMA AMG Feb 10. In the absence of such control 

or knowledge, the investor would be eligible for an 

exemption from the aggregation requirement. Thus, 

it is not the case, as the commenter argued (see id.), 

that the owned entity aggregation threshold at 10 

percent is over-inclusive, or that it would require 

a purely passive investor to aggregate the positions 

of all entities in which the investor has beneficial 

equity ownership of 10 percent or more. Also, 

passive investors would not necessarily have to 

determine how owned entities transact in 

commodity derivatives, as the commenter argued. 

See id. Instead, passive entities would only have to 

ensure that they meet the requirements for the 

exemption in rule 150.4(b)(2), which the 

Commission expects they would, and file the notice 

required to use that exemption. 

334See CL–SIFMA AMG Feb 10. 

holdings in multiple funds or funds-offunds. The commenter also expressed 

that the Commission did not consider 

the costs for DCMs and SEFs to 

implement aggregation standards for all 

derivatives that would have to conform 

with proposed rule 150.4. These would 

include the costs of validating and 

approving aggregation-related notice 

filings made under proposed rule 

150.4(c).327

Regarding the costs faced by investors 

in multiple funds or funds-of-funds, this 

rulemaking considers these costs 

qualitatively but not quantitatively, 

because quantitative costs depend upon 

the specific characteristics and activities 

of market participants—for example, the 

extent to which investors have to 

aggregate pro rata interests in multiple 

funds or funds-of-funds. The 

Commission recognizes that these costs 

may be significant in some situations, 

such as where a single investor transacts 

in derivatives subject to position limits 

through multiple entities and funds. As 

noted in the discussion of costs in 

Section III.A.3., above, investors may 

not be able to determine easily which 

positions are held by an underlying 

fund or their precise percentage 

interests in funds. 

However, the Commission has 

determined that the requirements 

resulting in these costs are appropriate 

in order to prevent evasion of the 

position limits through coordinated 

trading. For example, as noted above in 

section II.H.3., in the absence of rule 

150.4(a)(2) the exemption in rule 

150.4(b)(1) would permit an investor to 

separate a large position in a given 

commodity derivative into positions 

held in various funds that have 

substantially identical trading strategies. 

As a practical matter, if an investor’s 

positions are near position limits, the 

investor could consider the merits of 

holding its positions in a single fund as 

compared to holding the positions in 

multiple funds. The investor might elect 

to hold its positions in a single fund 

instead of through multiple funds, in 

order to avoid the requirement under 

rule 150.4(a)(2) to aggregate the multiple 

holdings. Of course, the investor would 

have to comply with position limits 

whether it holds its positions in a single 

fund or in multiple funds. 

The discussion of costs in Section 

III.A.3., above, also covered costs to 

DCMs and SEFs that will be required to 

conform their aggregation policies to the 

Commission’s aggregation policy. 

Moreover, the Commission had 

discussed this issue in the Proposed 

Rule, when it noted that because the 

Commission’s aggregation rules would 

be precedent for aggregation rules 

enforced by DCMs and SEFs, it is 

important that the aggregation rules set 

out, to the extent feasible, bright line 

rules that are capable of easy 

application in a wide variety of 

circumstances, without being 

susceptible to circumvention.328 The 

Commission notes that proposed rule 

150.4(c)(2), which required a finding as 

to whether an applicant has satisfied the 

conditions for an exemption, is not 

being adopted. This should reduce the 

costs to DCMs and SEFs in reviewing 

filings made under rule 150.4(c), which 

was a concern to the commenter. 

One commenter claimed that when 

considering the costs and benefits of its 

proposed owned entity aggregation 

rules, the Commission assumes a costbenefit baseline that requires position 

aggregation based solely on ownership, 

regardless of the existence of common 

control.329 The commenter goes further 

to say that this is an inappropriate 

baseline, because neither the 

Commission nor DCMs currently require 

the aggregation of owned entity 

positions regardless of the existence of 

common control, and also because 

speculative positions outside of the spot 

month have not been subject to position 

limits in 19 out of the 28 ‘‘referenced 

contract’’ markets.330 ‘‘Aggregating nonspot-month positions of entities in 

which passive investors make 

investments presents considerable new 

challenges, which not been adequately 

considered,’’ the commenter stated.331

In response to this commenter, the 

Commission reiterates that the baseline 

is existing regulation 150.4, which does 

require aggregation based solely on 

ownership, regardless of the existence of 

common control.332

Also, as noted previously, the 

Commission has considered that the 

requirement to aggregate the positions of 

accounts or pools with substantially 

identical trading strategies, as well as 

the potential application of the 

aggregation requirement to a broader 

scope of positions and market 

participants, may increase the 

complexity of applying the aggregation 

requirement. The Commission 

understands that passive investors may 

be among those market participants that 

are affected by the new requirements. In 

response to this commenter’s concerns, 

the Commission notes that passive 

investors should be able to qualify for 

the exemption from aggregation in rule 

150.4(b)(2), because if the investor were 

passive it would meet the conditions for 

that exemption, which relate to an 

absence of coordinated trading. Thus, 

rule 150.4(b)(2) will mitigate the 

burdens on passive investors.333

The commenter also criticized the 

exemption for ownership interests in 

rule 150.4(b)(2) because it would not 

extend to all ownership interests, and 

would require a ‘‘burdensome’’ notice 

filing in all investment circumstances, 

despite the absence of any common 

trading control, ‘‘for no apparent 

benefit.’’ The commenter noted that 

passive investors in a commodity pool 

that are not affiliated with the pool 

operator would not, under the 

exemption in proposed rule 150.4(b)(1), 

be required to submit a notice filing to 

disaggregate the positions of pools in 

which they have invested, ‘‘regardless of 

their ownership interest in the pool,’’ 

and the Proposed Rule provides no 

reason why passive investors in owned 

entities should not have at least the 

same degree of deference.334

The Commission disagrees with the 

comment. The Commission does not 

believe that a notice filing is a heavy 

burden on any investor, passive or not, 

because the notice filing merely requires 

the investor to name the entities 

involved, describe the relevant 

circumstances that warrant 

disaggregation, and certify that the 

conditions in the applicable aggregation 

exemption have been met. As discussed 

above, the Commission believes that the 

notice filing requirement benefits the 

public and market participants because 

it will allow the Commission to monitor 

usage of the aggregation exemptions and 

receive notice of potential red flags that 

warrant further investigation. 

Furthermore, the Commission 

believes that the difference in treatment 


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335See id. 

336The commenter described the holdings in 

dollar amounts. See id. The Commission notes 

however that the position limits generally are stated 

in terms of a number of contracts, not a dollar 

amount. To apply rule 150.4(a)(2), a person holding 

or controlling the trading of positions in more than 

one account or pool with substantially identical 

trading strategies must determine the person’s pro 

rata interest in the number of contracts such 

accounts or pools are holding. 

337See e.g., CL–FIA Feb 6; CL–COPE Feb 10; CL– 

SIFMA AMG Feb 10. 

338See CL–SIFMA AMG Nov 13. 

339See e.g., CL–SIFMA AMG Nov 13; CL–FIA 

Nov 13 CL-Working Group Nov 13. 

between limited partners and similar 

pool participants in rule 150.4(b)(1), and 

owners of entities in rule 150.4(b)(2), is 

sensible. First, the Commission notes 

that rule 150.4(b)(1) continues the 

treatment of pool participants under the 

existing regulation. As the commenter 

said, rule 150.4(b)(1) does not include a 

notice filing requirement where the 

participant is not affiliated with the 

commodity pool operator. The 

Commission is comfortable that little 

additional benefit would be achieved by 

requiring a notice filing in this situation, 

because a separate entity is designated 

as the commodity pool operator (and 

may be subject to registration with the 

Commission). By contrast, rule 

150.4(b)(2) applies to any type of owned 

entity. In this situation, the Commission 

believes that the costs incurred by the 

owner seeking an exemption to file a 

notice with the Commission are 

reasonable in view of the very large 

variety of corporate structures and 

management arrangements that may be 

in place. Given this variety, there are 

important benefits from a notice filing 

because the notices inform the 

Commission of the circumstances in 

which the exemption is being used and 

thereby permit the Commission to 

monitor use of the exemption. 

The commenter also maintained that 

the Commission inadequately 

considered the costs and benefits of the 

proposed substantially identical trading 

strategies requirement at proposed rule 

150.4(a)(2), and that the requirement is 

unworkable in practice. The commenter 

noted, for example, ‘‘a $10,000 investor 

in two $1 billion commodity index 

mutual funds using the same index may 

have to aggregate the positions in those 

two $1 billion mutual funds because 

they follow ‘substantially identical 

trading strategies.’ ’’ The commenter 

believed such an investor would have to 

implement a compliance program to 

prevent inadvertent violations of the 

position limits rules, which (in addition 

to imposing significant legal and 

operational obstacles) would impose 

costs many times the investor’s $10,000 

investment.335

The Commission disagrees with the 

commenter’s view that it inadequately 

considered the costs and benefits of the 

substantially identical trading strategies 

requirement. The Commission has 

explained that the requirement under 

proposed rule 150.4 is effected on a pro 

rata basis. That is, the terms of the rule 

require the owner to aggregate the 

positions that it (i.e., the owner) holds 

in the two commodity index mutual 

funds, not the positions of the funds 

themselves, so that in the commenter’s 

example the two holdings would be 

aggregated into one $20,000 holding.336

The Commission acknowledges that the 

determination of the owner’s pro rata 

interest in the number of contracts such 

accounts or pools are holding may 

create practical difficulties for the 

owner—in particular when the owner is 

unaware of the underlying positions of 

the account or pool. However, as 

discussed above the Commission 

believes that the requirement in rule 

150.4(a)(2) provides important benefits 

by preventing circumvention of the 

aggregation requirements. 

5. Alternatives 

The Commission considered the costbenefit implications of the following 

significant alternatives: 

• Different ownership thresholds 

(e.g., 25 percent or 50 percent) for the 

aggregation requirement in rule 

150.4(a)(1). As discussed in Section 

II.A.3.a, the Commission recognizes that 

a higher ownership threshold would 

presumably decrease the number of 

persons required to aggregate or seek 

exemptions from aggregation. Yet, there 

is uncertainty about how beneficial this 

reduction would be in reducing burdens 

and how harmful it would be in 

reducing the amount of information 

available to the Commission. Because of 

this uncertainty, the Commission has 

determined not to change the 10 percent 

threshold in effect under the current 

regulations. 

• Aggregation on a basis pro rata to 

the ownership interest in the owned 

entity. Commenters suggested that 

Commission base the aggregation 

requirement on a pro rata ownership or 

equity interest.337 Arguably, pro rata 

aggregation would more accurately 

reflect the positions owned by market 

participants and would not 

unnecessarily restrict the positions of 

market participants, while reducing the 

risk of an inadvertent position limits 

overage. The Commission has decided 

not to offer such an aggregation method. 

As explained above, while there are 

theoretical merits to a pro rata 

aggregation method as it would measure 

a market participant’s ownership and 

equity levels more accurately, 

commenters did not offer suggestions on 

how such an exemption would work 

practically, especially when ownership 

and control may change on an inter-day 

basis. Nor did commenters provide 

information regarding the extent to 

which a pro rata approach would 

actually mitigate the aggregation 

requirement (e.g., how often entities 

which are subject to an aggregation 

requirement, and not eligible for an 

exemption, are owned at a level 

substantially below 100 percent). In 

such circumstances, implementing a pro 

rata aggregation standard would be 

expensive in terms of costs related to 

developing and maintaining systems 

that would connect multiple market 

participants (e.g., CPOs, beneficial 

owners), DCMs, and SEFs, to share 

information to perform pro rata 

calculations. The Commission believes a 

pro rata aggregation standard would be 

more costly than the standard the 

Commission is finalizing. 

• No notice filing. A commenter 

suggested that the Commission 

eliminate the exemption notice filing for 

passive investors.338 The Commission 

disagrees and has not added any new 

exemption from the notice filing. A onetime notice filing (with updates upon 

any material change) is not a substantial 

burden. It is noteworthy that, as 

discussed above, commenters made 

suggestions as to the timing and 

mechanics of the notice filing, but 

generally did not object to the 

requirement to make an exemptionnotice filing. Moreover, as discussed 

above, a notice filing increases the 

Commission’s and other market 

regulators’ abilities to monitor usage of 

the aggregation exemptions and oversee 

market participants benefitting from the 

exemptions. 

• Addition of exemptions for passive 

investors such as pension plans and 

transitory ownership interests acquired 

through credit events.339 As discussed 

above in Section II.A.3.d., the 

Commission believes that applying rules 

for specific treatment of particular 

situations or classes of entity would be 

complex and not justified by the 

potential benefits to the entities 

receiving different treatment. For 

example, the Commission believes that 

distinguishing ‘‘transitory’’ ownership 

from other forms of ownership would be 

more complicated than completing the 

notice required to obtain relief, and in 

such situations it is reasonable to expect 

that the notice filing would be made on 

a summary basis appropriate to the 


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340See earlier discussion of the example 

involving Entity A in Section III.A.2., above. 

341 44 U.S.C. 601 et seq. 

342 5 U.S.C. 601(2), 603–05. 

343See 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); 

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). 

transitory situation. Similarly, 

application of definitional rules to 

delineate when a class of entities such 

as pension plans would not have to 

apply for an exemption from aggregation 

would be complex as compared to the 

notice filing that a pension plan could 

file to receive an exemption from 

aggregation. 

6. Section 15(a) Considerations 

As the Commission has long held, 

position limits are regulatory tools that 

are 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 

Commission believes the final rules will 

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 final 

rules will not materially affect the level 

of protection afforded market 

participants and the public that is 

provided by the aggregation policy 

reflected currently in regulation 150.4. 

Given that the aggregation standards are 

necessary to implement effective 

position limits, it is important that the 

final exemptions be sufficiently tailored 

to exempt from aggregation only those 

positions or accounts that pose a low 

risk of coordinated trading. The ownedentity exemption will 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 final 

exemption focuses on the conditions 

that impact trading independence. In 

addition, by providing an avenue to 

apply for relief when ownership is 

greater than 10 percent of the owned 

entity, the final rules will allow market 

participants greater flexibility in 

meeting the requirements of the position 

limits regulations, provided they are 

eligible to apply. The Commission 

believes that all of the exemptions will 

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. 

Furthermore, the exemptions will not 

significantly reduce the protection of 

market participants and the public that 

the Commission’s aggregation policy 

affords. 

b. Efficiency, Competition, and 

Financial Integrity of Markets 

The Commission believes the final 

exemptions will reduce costs for market 

participants without compromising the 

integrity or effectiveness of the 

Commission’s aggregation policy. An 

important rationale for providing 

aggregation exemptions is to avoid 

overly restricting commodity derivatives 

trading of affiliated entities not 

susceptible to coordinated trading. Such 

trading restrictions may potentially 

result in reduced liquidity in 

commodity derivatives markets, 

diminished investment by largely 

passive investors, or distortions of 

existing decentralized business 

structures. Thus, the final exemptions 

help promote efficiency and 

competition, and protect market 

integrity by helping to prevent these 

undesirable consequences. 

c. Price Discovery 

The Commission expects the final 

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. By relaxing 

aggregation requirements in 

circumstances not conducive to 

coordinated trading, the final 

exemptions may help improve liquidity 

by encouraging more market 

participation. Specifically, the 

Commission believes that these 

exemptions will help to encourage 

market participation on registered 

exchanges so that price discovery will 

not move to other market platforms 

where similar transactions could be 

effected, such as foreign boards of trade. 

d. Sound Risk Management Practices 

The imposition of position limits 

helps to restrict market participants 

from amassing positions that are of 

sufficient size to disrupt the operation 

of commodity derivatives markets. The 

final exemptions will allow affiliated 

entities to disaggregate their positions in 

circumstances that the Commission 

believes present minimal risk of 

coordinated trading with potential to 

disrupt market operations. The 

Commission believes that the final 

exemptions will not materially inhibit 

the use of commodity derivatives for 

hedging, as bona fide hedging 

exemptions are available to any entity 

regardless of aggregation of positions 

and exemptions from aggregation. 

Where there is little possibility of 

coordinating trading, the final rules 

facilitate sound risk management by 

permitting an entity to manage its risks 

where risks are being generated.340

e. Other Public Interest Considerations 

The Commission did not identify any 

other public interest considerations 

related to the costs and benefits in the 

proposed exemptive relief to 

aggregation. No commenter on the 

Proposed Rule or the Supplemental 

Notice identified any other public 

interest consideration, either. 

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.341 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).342 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.343 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, 

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

actions taken herein will not have a 

significant economic impact on a 

substantial number of small entities. 


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344See Proposed Rule, 78 FR at 68973, and 

Supplemental Notice, 80 FR at 58377. 

345The Bureau of Labor Statistics reports that an 

average of 32.8 percent 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 percent to use in its 

calculations. 

346Other 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 percent for overhead and 

administrative expenses to attempt to 

conservatively estimate the average for the industry. 

347See Proposed Rule, 78 FR at 68975 and 

Supplemental Notice, 80 FR at 58378. 

The Chairman made the same 

certification in the Proposed Rule and 

the Supplemental Notice,344 and the 

Commission did not receive any 

comments on the RFA. 

C. Paperwork Reduction Act 

1. Overview 

The Paperwork Reduction Act 

(‘‘PRA’’), 44 U.S.C. 3501 et seq., 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 final rules will 

result in amendments to previouslyapproved collection of information 

requirements within the meaning of the 

PRA. Therefore, the Commission 

submitted to OMB for review, in 

accordance with 44 U.S.C. 3507(d) and 

5 CFR 1320.11, the information 

collection requirements in this 

rulemaking, as an amendment to the 

previously-approved collection 

associated with OMB control number 

3038–0013. 

Responses to this collection of 

information will be mandatory. The 

Commission will protect proprietary 

information according to the Freedom of 

Information Act and 17 CFR part 145, 

titled ‘‘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. 

On November 15, 2013, the 

Commission published in the Federal 

Register a notice of proposed 

modifications to part 150 of the 

Commission’s regulations (i.e., the 

Proposed Rule). The modifications 

addressed 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, and noted that the 

modifications would also apply to the 

position limits regimes for other exempt 

and agricultural commodity futures and 

options contracts and the physical 

commodity swaps that are economically 

equivalent to such contracts, if such 

regimes are finalized. On September 29, 

2015, the Commission published in the 

Federal Register a revision to the 

Proposed Rule (i.e., the Supplemental 

Notice). 

The Commission final rule provides 

that all persons holding a greater than 

10 percent ownership or equity interest 

in another entity could avail themselves 

of an exemption in rule 150.4(b)(2) to 

disaggregate the positions of the owned 

entity. To claim the exemption, a person 

needs to meet certain criteria and file a 

notice with the Commission in 

accordance with proposed rule 150.4(c). 

The notice filing needs to demonstrate 

compliance with certain conditions set 

forth in rule 150.4(b)(2)(i)(A)–(E). 

Similar to other exemptions from 

aggregation, the notice filing is effective 

upon submission to the Commission (or 

earlier, as provided in rule 150.4(c)(2)), 

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. 

2. Methodology and Assumptions 

It is not possible at this time to 

precisely determine the number of 

respondents affected by the final rule. 

The final rule relates to 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 2013 

salary information for the securities 

industry compiled by the Securities 

Industry and Financial Markets 

Association (‘‘SIFMA’’). The 

Commission is using a figure of $160 

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 

2013, modified to account for an 1800- 

hour work-year, adjusted to account for 

the average rate of inflation in through 

April 2016. This figure was then 

multiplied by 1.33 to account for 

benefits 345 and further by 1.5 to account 

for overhead and administrative 

expenses, and rounded to the nearest 

ten dollars.346 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 

percent weight), ‘‘senior accountant’’ 

(15 percent), ‘‘compliance manager’’ (30 

percent), and ‘‘assistant/associate 

general counsel’’ (40 percent). 

The Commission requested comment 

on its assumptions and estimates in the 

Proposed Rule and the Supplemental 

Notice,347 but did not receive any 

comments. 

3. Collections of Information 

Rule 150.4(b)(2) requires qualified 

persons to file a notice in order to claim 

exemptive relief from aggregation. 

Further, rule 150.4(b)(2)(ii) states that 

the notice is to be filed in accordance 

with rule 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. 

Persons claiming these exemptions 

would be required to submit to the 


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348The Commission’s estimate that 25 entities 

will each file one notice annually reflected those 

entities which had been estimated to each file one 

notice annually under proposed rule 150.4(b)(3), 

which the Commission is not adopting. Therefore, 

the Commission estimated that each of these 25 

entities would file one notice annually under rule 

150.4(b)(2), in place of the assumed filing under 

proposed rule 150.4(b)(3). See Supplemental 

Notice, 80 FR at 58378. 

349That is, the Commission estimated that a total 

of 225 filings would be made each year. At 20 hours 

per filing, the total burden would be 4,500 labor 

hours, which divided among the 125 entities results 

in an average burden of 36 labor hours per entity. 

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. 

The final rule also extends relief 

available under rule 150.4(b)(4) to 

additional entities; so 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)(4). The Commission also 

expects entities to file for relief under 

rule 150.4(b)(7), 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 rule 

150.4(b)(8) 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 final 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. 

In the Supplemental Notice, the 

Commission estimated that 100 entities 

will each file two notices annually, and 

25 entities will each file one notice 

annually,348 under proposed rule 

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

filing. Thus, the Commission 

approximated a total per entity average 

burden of 36 labor hours annually.349 At 

an estimated labor cost of $120 per 

hour, the Commission estimated a cost 

of approximately $4,320 per entity on 

average for filings under rule 

150.4(b)(2). For this final rule, while the 

Commission maintains its estimates of 

the number of entities and number of 

filings, its update of the estimated labor 

cost to $160 per hour, as noted above, 

increases the estimated cost to 

approximately $5,760 per entity on 

average for filings under rule 

150.4(b)(2). 

As in the Proposed Rule and the 

Supplemental Notice, the Commission 

estimates that 75 entities will each file 

one notice annually under rule 

150.4(b)(4) (proposed paragraph (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 

$160 per hour, the Commission 

estimates a cost of approximately $1,600 

per entity for filings under rule 

150.4(b)(4). 

And, again as in the Proposed Rule 

and the Supplemental Notice, the 

Commission estimates that 40 entities 

will each file one notice annually under 

rule 150.4(b)(7) (proposed paragraph 

(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 $160 per hour, 

the Commission estimates a cost of 

approximately $6,400 per entity for 

filings under rule 150.4(b)(7). 

In sum, the Commission estimates 

that 240 entities will submit a total of 

340 responses per year and incur a total 

burden of 6,850 labor hours. At the 

updated cost of $160 per hour, this 

results in a cost of approximately 

$1,096,000 annually in order to claim 

exemptive relief under rule 150.4. 

List of Subjects in 17 CFR Part 150 

Position limits, Bona fide hedging, 

Referenced contracts. 

For the reasons discussed in the 

preamble, the Commodity Futures 

Trading Commission amends 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. In § 150.1, 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 

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 for managed 

positions and accounts to fulfill its duty 

to supervise diligently the trading done 

on its behalf or as is 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: 


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■ a. Remove the semicolon and the 

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

and add a period in their place; and 

■ b. 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 

(determined pro rata) with all other 

positions held and trading done by such 

person and the positions in accounts 

which the person must aggregate 

pursuant to paragraph (a)(1) of this 

section. 

(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 (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 (to the extent that such 

person is aware or should be aware of 

the activities and practices of the 

aggregated entity or 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 

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 its 

trades or its trading strategy with 

employees that control the trading 

decisions of the other; and 

(ii) Such person complies with the 

requirements of paragraph (c) of this 

section. 

(3) 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. 

(4) 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 


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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 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. 

(ii) [Reserved]. 

(5) 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. 

(6) 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 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. 

(7) 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 

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. 

(8) Exemption for affiliated entities. 

After a person has filed a notice under 

paragraph (c) of this section, another 

person need not file a separate notice 

identifying any position or account 

identified in such notice filing, 

provided that: 

(i) Such other person has an 

ownership or equity interest of 10 

percent or greater in the person that 

filed the notice, or the person that filed 

the notice has an ownership or equity 

interest of 10 percent or greater in such 

other person, or an ownership or equity 

interest of 10 percent or greater is held 

in such other person by a third person 

who holds an ownership or equity 

interest of 10 percent or greater in the 

person that has filed the notice (in any 

such case, the ownership or equity 

interest may be held directly or 

indirectly); 

(ii) Such other person complies with 

the conditions applicable to the 

exemption specified in such notice 

filing, other than the filing 

requirements; and 

(iii) Such other person does not 

otherwise control trading of any account 

or position identified in such notice 

filing. 

(iv) Upon call by the Commission, any 

person relying on the exemption in this 

paragraph (b)(8) 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), (b)(4), or (b)(7) of this 

section shall file a notice with the 

Commission, which shall be effective 

upon submission of the notice (or 

earlier, as provided in paragraph (c)(2) 

of this section), 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) If a person newly acquires an 

ownership or equity interest in an 

owned entity of 10 percent or greater 

and is eligible for the aggregation 

exemption under paragraph (b)(2) of this 

section, the person may elect that a 

notice filed under this paragraph (c) 

shall be effective as of the date of such 

acquisition if such notice is filed no 

later than 60 days after such acquisition. 

(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. 

(6) If a person is eligible for an 

aggregation exemption under paragraph 

(b)(1)(ii), (b)(2), (b)(3), (b)(4), or (b)(7) of 

this section, a failure to timely file a 

notice under this paragraph (c) shall not 

constitute a violation of paragraph (a)(1) 

of this section or any position limit set 

forth in § 150.2 if such notice is filed no 

later than five business days after the 

person is aware, or should be aware, 

that such notice has not been timely 

filed. 

(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. 


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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)(8)(iv) of this 

section to call for additional information 

from a person claiming the exemption 

in paragraph (b)(8) of this section. 

(ii) In paragraph (c)(3) of this section 

to call for additional information from a 

person claiming an aggregation 

exemption under 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 December 6, 

2016, by the Commission. 

Christopher J. Kirkpatrick, 

Secretary of the Commission. 

Note: The following appendix will not 

appear in the Code of Federal Regulations. 

Appendix to Aggregation of Positions— 

Commission Voting Summary 

On this matter, Chairman Massad and 

Commissioners Bowen and Giancarlo voted 

in the affirmative. No Commissioner voted in 

the negative. 

[FR Doc. 2016–29582 Filed 12–15–16; 8:45 am] 

BILLING CODE 6351–01–P 


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