Commodity Futures Trading Commission January 2010 – Federal Register Recent Federal Regulation Documents

The Commodity Futures Trading Commission (``CFTC'' or ``Commission'') is proposing to implement speculative position limits for futures and option contracts in certain energy commodities. The Commodity Exchange Act of 1936 (``CEA'' or ``Act'') gives the Commission the authority to establish limits on positions to diminish, eliminate or prevent excessive speculation causing sudden or unreasonable fluctuations in the price of a commodity, or unwarranted changes in the price of a commodity. In addition to identifying the affected energy contracts and the position limits that would apply to them, the notice of proposed rulemaking includes provisions relating to exemptions from the position limits for bona fide hedging transactions and for certain swap dealer risk management transactions. The notice of proposed rulemaking also sets out an application process that would apply to swap dealers seeking a risk management exemption from the position limits, as well as related definitions and reporting requirements. In addition, the notice of proposed rulemaking includes provisions regarding the aggregation of positions under common ownership for the purpose of applying the limits.

The Commodity Futures Trading Commission (``Commission'' or ``CFTC'') is proposing to adopt a comprehensive regulatory scheme (``Proposal'') to implement the CFTC Reauthorization Act of 2008 (``CRA'') \1\ with respect to off-exchange transactions in foreign currency with members of the retail public (i.e., ``retail forex transactions''). The Commodity Exchange Act, as amended by the CRA, generally provides that the Commission's jurisdiction extends to contracts of sale of a commodity for future delivery (or an option on such a contract) or an option (other than an option executed or traded on a national securities exchange), and to certain leveraged or margined contracts in foreign currency that are offered to or entered into with retail customers. The Commission is proposing a scheme that would put in place requirements for, among other things, registration, disclosure, recordkeeping, financial reporting, minimum capital, and other operational standards, based on both the CFTC's existing regulations for commodity interest transactions and commodity interest intermediaries, as well as rules of the National Futures Association (``NFA'') that are already existing with respect to retail forex transactions offered by NFA's members. Additionally, the Proposal would amend existing regulations as needed to clarify their application to, and inclusion in, the new regulatory scheme for retail forex.