The Commodity Futures Trading Commission (CFTC) said on Tuesday it has formally withdrawn the proposed rule on position limits for certain energy commodities that it issued last January, clearing the way for broader curbs on speculation for all commodities under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law last month.
In issuing its notice of proposed rulemaking (NOPR) last January limiting speculative trading of exchange-traded futures and options contracts in major energy markets, the CFTC cited the apparent trading irregularities of Amaranth Advisors LLC and large positions taken by the United States Natural Gas Fund LP (UNG) as evidence of the need for action (see Daily GPI, Jan. 15).
The limits proposed in January would have applied to natural gas, light sweet crude oil, New York Harbor No. 2 heating oil and New York Harbor gasoline blend stock, covering the CFTC-regulated exchanges, notably CME Group's New York Mercantile Exchange (Nymex) and IntercontinentalExchange (ICE) in Atlanta. As with already installed position limits on agricultural commodities, the CFTC proposed to set position limits across the same contract month groupings; that is, all-month contracts (AMC), single-month and spot month.
The AMC speculative position limit had been proposed to be 10% of the first 25,000 contracts of open interest and 2.5% of open interest beyond 25,000 contracts. The single-month position limit was to be set at two-thirds of the AMC position limit, and the level of the spot-month limit in the physical delivery contracts would be 25% of the estimated deliverable supply.
Under the new reform law the CFTC has much broader authority over all exchanges and over-the-counter (OTC) transactions and traders. The agency lost no time in setting out its rulemaking goals on the day the financial reform law was signed (see Daily GPI, July 22).
In announcing that it was withdrawing its earlier NOPR, the agency said it would carry over comments from the earlier docket when it publishes a new proposal for Commission-set position limits and exemptions. The new law directs the CFTC to set limits for energy and metals contracts within 180 days of the July 21 reform law enactment, and agricultural contracts within 270 days. It requires aggregate limits across futures and swaps markets.
The CFTC has set up a web page listing the 30 areas where it plans to implement new regulations. Under each heading there is an email address for submitting advance comments and below that a place where any "submissions" from the public will appear. It is at www.cftc.gov/lawregulation/otcderivatives/otc_rules.html.
The agency, along with the Securities and Exchange Commission (SEC), also will host a public roundtable at 9 a.m. EDT on Aug. 20 at CFTC headquarters to discuss issues related to governance and conflicts of interest in the clearing and listing of swaps and security-based swaps.
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