FIA Recommends Changes in CFTC Position Limit Proposal

Futures Industry Association Comment Letter

RIN 3038-AD15 and 3038-AD16

March 25, 2011

The FIA on March 25 submitted a detailed response to the CFTC's proposed rulemaking on speculative position limits. Although the FIA continues to oppose implementation of hard limits and continues to challenge the view that speculative investments have caused an increase in commodity prices, the FIA set out a number of specific recommendations for revising the proposed rule.

The FIA also expressed its appreciation for the CFTC's decision to adopt a two-phase approach to the imposition of position limits, with the first phase applying only to spot months and the second phase delayed until after the CFTC collects position data on physical commodity swaps, and its appreciation for the CFTC's decision to eliminate a proposal to "crowd out" a trader's ability to take speculative positions once that trader relies on a hedge exemption.

The FIA cautioned, however, that the CFTC has not yet provided sufficient empirical evidence to support this rulemaking and therefore asked the CFTC to withdraw the rule until after it has collected and analyzed the data necessary to determine that position limits are necessary and appropriate as required by the law.

Cross References

Dodd-Frank Act, Title VII, Sec. 737