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CFTC votes privately to ease position-limits regulations

Jill Sommers

The Commodity Futures Trading Commission privately voted 5-0 to propose easing regulations affecting position limits in wheat, oil, natural gas and other commodities following requests from energy and agriculture lobbying groups last week.

The five member commission will propose changing the way firms aggregate trading positions when those firms have ownership stakes in other companies. The commission proposed raising the threshold of ownership or equity stake from 10 percent to 50 percent, Bloomberg reports.

“I support the commission’s proposed rules that, among other things, expand the exemptions relating to information-sharing restrictions [and] expand the circumstances under which market participants will not be required to aggregate positions,” CFTC Commissioner Jill E. Sommers said, according to Bloomberg.

The proposal would affect position limits, which cap the number of contracts any one trader may have in the market. The current position limits have prompted a lawsuit by the Securities Industry and Financial Markets Association, as well as the International Swaps and Derivatives Association, Inc.

“Absent actual relief from the aggregation requirements of the position limit rules, commercial firms likely will have to significantly reorganize their existing commercial operations,” the Working Group of Commercial Energy Firms said in a January petition, Bloomberg reports. “These actions may include the restructuring or disposition of investments in joint ventures.”

CFTC Commissioner Bart Chilton said that the limits would still require firms to aggregate trading positions if they are under “common trading control.”

“What the rule does is provide commercial companies with an investment that is less than 50 percent of the total shares in another company the ability to disaggregate their positions with those held by the company they’ve invested in, as long as there is no common trading control,” Chilton said, according to Bloomberg.