MFA Submits Comments to CFTC Regarding Proposed Aggregation of Positions Rule

The Managed Funds Association ("MFA") submitted a comment letter to the CFTC on the proposed rulemaking to modify the aggregation requirements under its position limits rules. The letter focused on the impact that the 2013 Aggregation Proposal ("the Proposal") would have on MFA members; specifically, how it would affect members that (i) utilize multiple independent trading strategies, (ii) may be invested in "owned entities," including operating companies that are not commodity pools, and/or (iii) may be "passive owners in the funds of funds context."The letter stated that MFA generally supports the disaggregation relief for owned entities in the Proposal; however, it offered a few recommendations to the CFTC primarily about qualifying passive owners.Additionally, MFA expressed support for the CFTC's modified approach toward entities where passive ownership in the owned entity exceeds the 50-percent ownership threshold with the opportunity to seek disaggregation relief. However, MFA also stated its concern that the conditions for obtaining this relief are "too restrictive and will undercut the ability of many entities to avail themselves of such relief." MFA recommended that the CFTC should adopt a notice filing procedure applicable to such relief and more transparent standards. Additionally, MFA stated that the CFTC should consider increasing the level at which aggregation is required from 10 to 25 percent or more for an entity's passive ownership interest in an operating company.MFA also recommended that the CFTC remove the passive ownership limitation of 25 percent in a commodity pool that applies to a manager that is exempt from registration as a CPO under CFTC Rule 4.13 ("Exemption from Registration as a Commodity Pool Operator"). MFA explained that "failure to do so will have the practical effect of creating a trap for passive investors in CFTC Rule 4.13 exempt commodity pools who do not control investment decisions or have the ability to monitor or access information relating to investments in such investee funds."Furthermore, MFA stated, the consolidated financial statements are not a "useful way to determine whether common trading control exists amongst commonly-owned entities." MFA stated that it believes the CFTC should eliminate this condition from the requirements for disaggregation relief for persons with a greater than 50-percent ownership interest in an owned entity.

See:MFA Comment Letter.See generally: CFTC Rule Calendar (accessible to Cabinet subscribers only). Related news: CFTC Publishes Extension of Comment Period for Aggregation of Position Proposed Rule (Fed. Reg.) (January 14, 2014); CFTC Publishes Proposed Rules for Aggregation of Positions (Fed. Reg. Version) (November 15, 2013) Key Differences between the Recent CFTC Position Limits Proposal and the Previously Vacated Final Position Limits Rule (with Delta Strategy Group Summary) (November 18, 2013) Cadwalader Memo on Proposed Position Limits and Aggregation Rules (with Lofchie Comment) (November 6, 2013); CFTC Approves Position Limits Proposal (with Lofchie and Zwirb Comments and Delta Strategy Group Summary) (November 5, 2013) MFA Files Comments to CFTC on Position Limits Aggregation Proposal (July 2, 2012).