Commodity Futures Trading Commission ♦ Division of Market Oversight ♦ 202-418-5260

Commodity Futures Trading Commission

Office of Public Affairs

Three Lafayette Centre

1155 21st Street, NW

Washington, DC 20581

www.cftc.gov

Proposed Regulations on Position Limits for Derivatives

The Commodity Futures Trading Commission announced the approval for publication in the Federal Register of 

proposed regulations concerning limits on speculative positions in 28 selected physical commodity futures and 

swaps. The proposed regulations would implement section 737 of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank Act).

Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer

Protection

Act. Among other things, the Commission interprets the Dodd-Frank Act to:

 Require the Commission to limit the amount of positions, other than bona fide hedging positions,

that may be held by any person with respect to physical commodity futures and option contracts in

exempt and agricultural commodities traded on or subject to the rules of a designated contract market

(DCM), as appropriate.

 Require the Commission to establish position limits, including aggregate position limits, for swaps

that are economically equivalent to DCM contracts in exempt and agricultural commodities

(collectively, “economically equivalent swaps”). Such limits must be imposed simultaneously with 

limits on DCM contracts.

District Court Vacated Prior Rulemaking

On October 18, 2011, the Commission passed final rules on position limits for futures and swaps. See, 76 Fed. Reg. 

71626, October 28, 2011. On September 28, 2012, the district court issued an order that generally vacated those 

final rules and remanded the matter to the Commission. See, International Swaps and Derivatives Association 

v. United States Commodity Futures Trading Commission, 887 F. Supp. 2d 259 (D.D.C. 2012). The 

Commission is now re-proposing position limits for futures and swaps.

2013 Proposed Regulations on Position Limits

The Commission’s proposed regulations call for:

 Commission administered limits on speculative positions in 28 core physical commodity contracts

and their “economically equivalent” futures, options, and swaps (collectively “referenced 

contracts”).

 Establishment of speculative limits on referenced contracts effective sixty days after publication of 

a final rule:
Commodity Futures Trading Commission ♦ Division of Market Oversight ♦ 202-418-5260

o Spot-month position limits. Proposed initial levels will be based on the spot-month position limit

levels currently in place at DCMs. Alternatively, initial levels may be based on estimates of 

deliverable supply submitted by a DCM, if verified by the Commission. Subsequent levels 

would be adjusted no less frequently than every two years. These subsequent levels will be based 

on the Commission’s determination of deliverable supply (developed in consultation with

DCMs).

o Non-spot-month position limits (i.e., limits applied to positions in all contract months combined or 

in a single contract month). Proposed initial levels will be set based on open interest in futures 

and swaps that are significant price discovery contracts. Subsequent levels will be adjusted no less 

frequently than every two years based on referenced contract open interest for a calendar year.

 Spot-month position limit levels set generally at 25% of estimated deliverable supply. These spotmonth limits will be applied separately for physical-delivery referenced contracts and cash-settled 

referenced contracts in the same commodity.

 An exemption to the cash-settled spot-month limit available to a trader with a position up to fivetimes the level of the cash-settled limit, provided that trader does not hold any position in the 

physical-delivery spot-month contract in the same commodity.

 Non-spot-month position limits (i.e., limits applied to positions in all contract months combined or 

in a single contract month) set using the 10/2.5 percent formula: 10 percent of the contract’s first 

25,000 of open interest and 2.5 percent thereafter.

 Open interest used in determining subsequent non-spot-month position limits will be the sum of 

futures open interest, cleared swaps open interest, and uncleared swaps open interest.

 Exemptions for bona fide hedging positions in physical commodities based on the Dodd-Frank Act’s 

new requirements for such positions. Proposed new exemptions include unfilled anticipated

requirements for resale by a utility, royalties, and service contracts.

 Exemptions for positions that are established in good faith prior to the effective date of the initial 

limits established by the regulations.

 Requirements and acceptable practices for DCMs and swap execution facilities that are trading 

facilities for setting position limits for the 28 referenced contracts, as well as position limits or

accountability rules in all other listed contracts, including excluded commodities.

 Amendments to the Commission’s current account aggregation standards, substantially similar to the 

aggregation modifications proposed to vacated Part 151. See 77 Fed. Reg. 31767 (May 30, 2012). The 

amendments would permit additional exemptions from aggregation where:

o Sharing of information would violate or create reasonable risk of violating Federal, state or 

foreign jurisdiction law or regulation. 

o Ownership interest is no greater than 50 percent in an entity whose trading is independently 

controlled.
Commodity Futures Trading Commission ♦ Division of Market Oversight ♦ 202-418-5260

o Ownership interest is greater than 50 percent in a non-consolidated entity whose trading is 

independently controlled and an applicant certifies that such entity’s positions either qualify as 

bona fide hedging positions or do not exceed 20 percent of any position limit.

o Ownership results from broker-dealer activities in the normal course of business as a dealer.