SPEECHES & TESTIMONY

Statement of Chairman Timothy Massad on Supplemental Proposal on Position Limits for Derivatives

May 26, 2016

Today, the CFTC has taken a significant step toward finalizing its rules on position limits this year.

The supplemental rule we have unanimously proposed today would ensure that commercial end-users can continue to engage in bona fide hedging efficiently for risk management and price discovery. It would permit the exchanges to recognize certain positions as bona fide hedges, subject to CFTC oversight.

For years, exchanges have worked with the CFTC’s general definition of a “bona fide hedging position” to grant these exemptions to exchange-set limits. Under this supplemental proposal, they would do so for federal limits, subject to strict oversight by the CFTC. Today’s action comes after listening closely to the concerns of market participants, and in particular commercial-end users, who use these markets every day to hedge commercial risk. Today’s proposal would also make some helpful clarifications to definitions used in our earlier proposal, including the definition of “bona fide hedging position,” to conform it to the statutory language.

This proposal is a critical piece of our effort to complete the position limits rule this year. Another key piece of that effort was the Commission’s 2015 proposal to streamline the process for waiving aggregation requirements when one entity does not control another’s trading, even if they are under common ownership. We are also working to review exchange estimates of deliverable supply so that spot month limits may be set based on current data.

Federal position limits for agricultural contracts have been in place in our markets for decades, and exchange-set position limits for most other physical commodity contracts have been in place for years. It is critical that we fulfill our statutory responsibility to adopt a position limits rule. As I have said previously, we appreciate the importance and complexity of the issues surrounding the position limits rule. No current Commissioner was in office when these rules were proposed, and therefore we have taken the time to listen to market participants and consider the proposals very carefully.

I thank our staff for their excellent work on this proposal. I also thank my fellow Commissioners Bowen and Giancarlo for their input and support. And I look forward to hearing the views of market participants and to completing a position limits rule this year.

Last Updated: May 26, 2016