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APGA Faults Proposed Position Limits

A municipal gas utility trade group has called on the Commodity Futures Trading Commission (CFTC) to reduce the proposed levels of the speculative position limits for non-spot month contracts.

The American Public Gas Association (APGA) "strongly believes that the notice proposes to set the levels so high that the speculative position limits would be largely ineffective in achieving their purpose of reducing or diminishing excessive speculation and unwarranted price movements," the group said.

Under the CFTC proposal, which was adopted in mid-January, non-spot month position limits (aggregate single-month and all-months-combined limits that would apply across classes, as well as single-month and all-months-combined position limits separately for futures and swaps) would be set for each referenced contract at 10% of open interest in that contract up to the first 25,000 contracts, and 2.5% thereafter (see Daily GPI, Jan. 14).

The APGA also asked the Commission to provide for an "individual-month speculative position limit that is less than the all-months combined limit," and to "apply a single, integrated spot-month limit to all contracts on the same commodity across markets regardless of the nature of the settlement procedure."

According to APGA, "the very high level at which the limits are set is exacerbated by not applying the aggregate speculative position limit across markets in the spot month to physically and cash-settled contracts."

The APGA also urged the CFTC to bolster its position visibility rules by adopting a position accountability rule, which would give the agency the authority to order "a trader over the position accountability level to refrain from further increasing [its] position. Such conditional 'soft' limits have been used by the exchanges and could be established by the Commission."

Lastly, the group called on the Commission to "enhance the proposed large trader reporting system to collect the data necessary to address the issue of limiting the size and effect of passive, long-only traders."

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