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CFTC removes speculative position limits loophole

The U.S. Commodity Futures Trading Commission has removed a provision allowing certain speculators to exceed federal speculative position limits on agricultural commodities.

The CFTC announced Aug. 20 that it is withdrawing two no-action letters that provided relief from federal agricultural speculative positions limits set forth in CFTC regulations.

“I believe that position limits should be consistently applied and vigorously enforced,” CFTC Chairman Gary Gensler said. “Position limits promote market integrity by guarding against concentrated positions.”

In a letter dated May 5, 2006, the CFTC’s Division of Market Oversight granted no-action relief to DB Commodity Services LLC, a commodity pool operator and commodity trading advisor, permitting the DB Commodity Index Tracking Master Fund to take positions in corn and wheat futures that exceeded federal speculative position limits set forth in CFTC regulations.

Subsequently, on Sept. 6, 2006, DMO granted similar no-action relief to another unidentified commodity pool operator and commodity trading advisor which employs a proprietary commodity investment strategy that includes positions in Chicago Board of Trade corn, soybeans and wheat futures contracts.

DMO has previously stated that the trading strategies employed by these entities would not qualify for a bona fide hedge exemption under the Commission’s regulations.

The CFTC also stated that DMO “will work with each of these entities as they transition to positions within current federal speculative limits. The withdrawal of these no-action positions is very specific and limited and does not affect any other no-action or regulatory positions taken by the CFTC or its staff with regard to these entities or other market participants.”

TAGS: Legislative
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