CFTC Issues Clarification Regarding Comments on Position Limits for Physical Commodity Derivatives and Aggregation Proposals
Commentary by Bob Zwirb
The CFTC issued a clarification and notice regarding the reopened comment periods for two Position Limit rulemakings. In order to provide commenters with sufficient time to respond to questions raised and points made at the December 9, 2014 Agricultural Advisory Committee meeting, the CFTC reopened the comment periods for an additional 45 days, from December 9, 2014 to January 22, 2015.
The notice provides interested parties an opportunity to comment on issues addressed at the meeting or in associated materials posted to the Commission's website, as they pertain to agricultural commodities, including (i) hedges of a physical commodity by a commercial enterprise; and (ii) the process for estimating deliverable supplies used in the setting of spot month limits.
Notwithstanding the expansion of the scope of the request for comment, the deadline for submission of comments to the CFTC remains January 22, 2015.
Click here to see a summary of the Notice and Clarification by Delta Strategy Group.
Click here to submit comments.
See: Clarification and Notice; Press Release; 80 FR 200.
Related news: CFTC Holds Agricultural Advisory Committee Meeting (December 9, 2014); CFTC Reopens Comment Period for Proposed Position Limits Rule (Fed. Reg.) (December 4, 2014); CFTC Reopens Comment Period for Proposed Position Limits Rule (with Lofchie and Zwirb Comments) (December 1, 2014).
Commentary
The CFTC appears to be proceeding in a more careful manner than in the past in setting position limits and developing a new aggregation policy for 28 exempt and agricultural commodities. This is evidenced by the agency's reopening for the third time the comment period for the proposed rules and its coordination of the rulemaking process to accommodate technical concerns and issues raised at the recent Agricultural Advisory Committee meeting, such as those relating to deliverable supply. That is all to the good, but as Commissioner Giancarlo cautions, there are also larger concerns at play, including risks to farmers if the CFTC "replace[s] farmers' commercial risk management decisions with Washington's risk management decisions."
Similar concerns apply outside the agricultural sphere, especially in the energy area. It is therefore positive that the CFTC's Energy and Environmental Markets Advisory Committee has been reestablished, and perhaps it would be prudent to address these concerns before proceeding further. This is especially appropriate, given that basic formulae and other criteria developed in the position limit regime for agricultural commodities are intended to be applied to non-farm physical commodities such as energy.