Commodity Futures Trading Commission November 2007 – Federal Register Recent Federal Regulation Documents

Section 150.2 of the Commodity Futures Trading Commission's (``Commission'') regulations imposes limits on the size of speculative positions that traders may hold or control in futures and futures equivalent option contracts on certain designated agricultural commodities named therein. Section 150.3 lists certain types of positions that may be exempted from these Federal speculative position limits. The Commission is proposing to provide an additional exemption for ``risk management positions.'' A risk management position would be defined as a futures or futures equivalent position, held as part of a broadly diversified portfolio of long-only or short-only futures or futures equivalent positions, that is based upon either: A fiduciary obligation to match or track the results of a broadly diversified index that includes the same commodity markets in fundamentally the same proportions as the futures or futures equivalent position; or a portfolio diversification plan that has, among other substantial asset classes, an exposure to a broadly diversified index that includes the same commodity markets in fundamentally the same proportions as the futures or futures equivalent position. The exemption would be subject to conditions, including that the positions must be passively managed, must be unleveraged, and may not be carried into the spot month.

The Commodity Futures Trading Commission (``Commission'') periodically reviews the speculative position limits for certain agricultural commodities set out in Commission regulation 150.2 (``Federal speculative position limits''). In this regard, the Commission has reviewed the existing levels for Federal speculative position limits and is now proposing to increase these limits for all single-month and all-months-combined positions in all commodities except oats, based on the formula set out in Commission Regulation 150.5(c). In addition, the Commission is also proposing to aggregate traders' positions for purposes of ascertaining compliance with Federal speculative position limits when a designated contract market (``DCM'') lists for trading a futures contract that shares substantially identical terms with a Regulation 150.2-enumerated contract listed on another DCM, including a futures contract that is cash-settled based on the settlement prices for a futures contract that is already enumerated. The Commission is requesting comment on these rule amendments.

The Commodity Futures Trading Commission (``Commission'') has amended Commission Regulation 3.10 concerning the registration of firms located outside the U.S. that are engaged in intermediating commodity interest transactions on U.S. designated contract markets (``DCMs'') and U.S. derivative transaction execution facilities (``DTEFs'').\1\ The amended regulation codifies past actions of the Commission or its staff to permit certain foreign firms that limit their customers to foreign customers, and submit U.S. DCM and DTEF business on behalf of those customers for clearing on an omnibus basis through a registered futures commission merchant (``FCM''), to be exempt from registration as an FCM pursuant to section 4d of the Commodity Exchange Act (``Act''). The amended regulation similarly extends the relief from registration to those foreign persons acting in the capacity of an introducing broker (``IB''), commodity trading advisor (``CTA'') and commodity pool operator (``CPO'') solely on behalf of foreign customers.