WASHINGTON, Dec. 5, 2016 – The Commodity Futures Trading Commission has reissued a position limits rule, giving life to a proposal last seen in 2013.

The commission voted unanimously to repropose regulations “implementing limits on speculative futures and swaps positions as called for in the Dodd-Frank Wall Street Reform and Consumer Protection Act.” The decision would reissue limits on speculative positions in 25 core physical commodity futures contracts and their economically equivalent futures, options, and swaps.

CFTC Chairman Timothy Massad defended the proposed rule in a written statement, saying similar limits “are not a new or untested concept.”

“While speculators play a necessary and important role in our markets, position limits can prevent the type of excessive speculation by a few large participants that leads to corners, squeezes and other activity that can distort markets and be unfair to other participants,” Massad said “Position limits can also promote convergence without compromising market liquidity.”

“(Position limits) have been in place in our markets for decades,” he continued, “either through federal limits or exchange-set limits, and they have worked well.”

Massad also pointed out that CFTC is “in a time of transition,” so he’s supporting issuing a new proposed rule rather than choosing to “adopt a final rule today that the Commission would choose not to implement or defend next year.”

Opposition to the proposed rule has already been signaled from Capitol Hill. In a statement, Senate Agriculture Committee Chair and Kansas Republican Pat Roberts condemned some of the language and said he was grateful it remains a proposal and not a final rule.

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“Though I do not appreciate so-called ‘midnight rulemaking’ and certainly am not in favor of limiting farmers, ranchers, and end-users’ risk management tools, I am encouraged that the CFTC decided not to make the controversial parts of this rule final,” Roberts said. “With the new administration preparing to hit the ground running and critical issues remaining unresolved, I’m hopeful the CFTC will not take away valuable risk management tools for our farmers, ranchers, and end-users. They need more tools – not less.” 

Michigan Democrat Debbie Stabenow, the committee's lead Democrat, disagreed. She said she was "disappointed that the CFTC is not finalizing the position limits rule in its entirety this year." She added that finalizing a new rule "should be the first priority of the Commission next year."

House Ag Committee Chair Mike Conaway, R-Texas, said limiting this to a proposal will offer concerned groups that have reached out to the committee "the opportunity to refine this rule and ensure that it does not negatively impact their ability to manage their risks."

The public can comment on the proposed rule for 60 days once it is published in the Federal Register. Separately, CFTC is also reproposing the definition of a “bona fide hedging position” and exemptions for bona find hedging positions in physical commodities.

(Story updated to include additional reaction.) 


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