[Federal Register: May 11, 2005 (Volume 70, Number 90)]
[Rules and Regulations]
[Page 24705-24707]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



17 CFR Part 150

RIN 3038-AC24

Revision of Federal Speculative Position Limits

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.


SUMMARY: The Commodity Futures Trading Commission (Commission) is
amending Commission regulation 150.2 to increase the speculative
position limit levels for all single-month and all-months-combined
positions subject to such limits. In addition, the Commission is making
other clarifying amendments concerning the aggregation of positions
when a Designated Contract Market (DCM) trades two or more contracts
with substantially identical terms, and is deleting several obsolete
provisions in part 150 that relate to contracts that are no longer
listed for trading or to DCMs that no longer exist.

DATES: Effective June 10, 2005.

FOR FURTHER INFORMATION CONTACT: Clarence Sanders, Attorney, Division
of Market Oversight, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581,
telephone (202) 418-5068, facsimile number (202) 418-5507, electronic
mail [email protected]; or Martin Murray, Economist, Division of Market
Oversight, telephone (202) 418-5276, facsimile number (202) 418-5507,
electronic mail [email protected].


I. Background

    On March 15, 2005 (70 FR 12621), the Commission published proposed
amendments to Commission regulation 150.2 to increase the speculative
position limit levels for single-month and all-months-combined
positions for CBT Corn, Oats, Soybeans, Wheat, Soybean Oil, and Soybean
Meal; MGE Hard Red Spring Wheat; KCBT Hard Winter Wheat, and NYBOT
Cotton No. 2.\1\ The spot month limits for all of these commodities
would remain unchanged. The Commission also proposed to clarify in
regulation 150.2 its practice of aggregating traders' positions for
purposes of ascertaining compliance with Federal speculative position
limits when a DCM lists for trading two or more contracts with
substantially identical terms based on the same underlying commodity
characteristics. Finally, the Commission proposed to delete several
obsolete provisions in part 150 that relate to contracts that are no
longer listed for trading or to DCMs that no longer exist.\2\

    \1\ Commission regulation 150.2 imposes three types of position
limits for each specified contract: a spot-month limit, a single-
month limit that applies to each non-spot month, and an all-months-
combined limit.
    \2\ Commission regulation 150.2 currently includes Federal
speculative position limits for agricultural commodities traded on
the MidAmerica Commodity Exchange (MidAm) and for the white wheat
futures contract traded on MGE. These provisions relating to the
MidAm and the MGE white wheat futures contract are obsolete and will
be repealed as part of this action. In addition, reference to the
New York Cotton Exchange is being changed to NYBOT to reflect a
change in corporate organization.

II. Final Rules

    The Commission is adopting as final rules without additional
amendment the revisions to the speculative position limit levels that
were set forth in the proposed rulemaking. This action is based upon
its experience in administering these limits and after carefully
considering the comments received in response to the notice of proposed
    Thirteen comment letters were received in response to the proposed
rulemaking, all but one of which was in favor. Favorable comments were
submitted by representatives of agricultural trade or producer
organizations, in particular the American Farm Bureau Federation (AFBF)
and the National Farmers Union (NFU) who filed a joint statement, the
National Grain Trade Council, and the National Grain and Feed
Association; two DCMs, the Minneapolis Grain Exchange and the Chicago
Board of Trade; and several entities representing the views of hedge
fund managers, particularly the Managed Funds Association, Eclipse
Capital, Campbell & Company, Rotella Capital Management, Chesapeake
Capital Corporation, John W. Henry & Co., and Graham Capital
Management. Most of the favorable comments supported the proposed
higher limits as a desirable interim step towards the ultimate
abolition of Federal limits, although the AFBF and NFU supported both
the higher limits and the continued retention of Federal limits
indefinitely. In this regard, as the Commission noted in its proposed
rulemaking, while the Commission has determined at this time to retain
Federal speculative position limits at the increased levels contained
herein, the Commission intends to continue its review of its current
policies regarding the administration of speculative position limits,
including a further evaluation of the merits of retaining Federal
speculative limits.
    The American Cotton Shippers Association (ACSA) opposed the
proposed increase in the single-month and all-months combined limits
for cotton. In particular, ACSA noted that the NYBOT has proposed, in
consultation with its cotton committee, the establishment of its own,
exchange-set speculative position limits for the cotton No. 2 futures
and option contracts. The NYBOT's proposed limits of 2,500 futures-
equivalent contracts for single months and 4,000 futures-equivalent
contracts for all months combined are lower than those to be adopted by
the Commission in this rulemaking. Accordingly, ACSA expressed the view
that the Commission should adopt in part 150 of the Commission's
regulations the NYBOT's proposed lower levels.\3\

    \3\ In an August 3, 2004, letter, the NYBOT submitted for
Commission approval proposed speculative position limit rules for
the cotton No. 2 futures and option contracts pursuant to Section
5c(c)(2) of the Commodity Exchange Act, and Commission regulation
40.4. At that time, the NYBOT also agreed to extend the Commission's
time to review and approve the amendments until such time as the
Commission should implement amendments to Commission regulation

    The Commission has taken this view into account but nevertheless
believes that the limit levels it has proposed for the NYBOT cotton No.
2 futures and option contracts under part 150 of the Commission's
regulations are appropriate and that no change from its proposed
rulemaking is necessary for several reasons. First, the Commission has
applied consistent criteria in setting Federal speculative limits for
all commodities subject to those limits, and it believes that it should
continue this policy. Accordingly, the all-months-combined speculative
position limit levels adopted herein, including the limit for the
cotton No. 2 futures contract, were set according to the Commission's
long standing and well-established formula that takes into

[[Page 24706]]

account open interest levels in the underlying futures and option
markets, and the single-month levels adopted herein for each commodity
were set to maintain the existing ratio between all-months-combined and
single-month levels. In addition, the Commission notes that most
comments made to the proposed rulemaking endorsed the Commission's
approach for setting the single-month and all-months-combined
speculative position limit levels. Finally, the Commission notes that
DCMs may set speculative position limits at levels lower than
Commission-specified levels, and that such lower levels would
necessarily apply to all position holders. Thus, for the cotton No. 2
contracts, the applicable limits would be the lower levels that the
NYBOT proposes to adopt, consistent with the comments expressed by the
ACSA. In this regard, it is the Commission's expressed policy to review
and approve, where appropriate, all speculative position limit
provisions adopted by DCMs, and furthermore that a violation of
contract market position limits that have been approved by the
Commission is also a violation of section 4a(e) of the Act.\4\

    \4\ See Appendix B to part 38 of the Commission's regulations,
pertaining to Acceptable Practices under Core Principle 5 for DCMs.

    In addition, the Commission is making other clarifying amendments
concerning the aggregation of positions when a Designated Contract
Market (DCM) trades two or more contracts with substantially identical
terms. No comments were received in opposition to this clarification.

III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq.,
requires Federal agencies, in proposing rules, to consider the impact
of those rules on small businesses. The Commission believes that the
rule amendments to raise Commission speculative position limits would
only impact large traders. The Commission has previously determined
that large traders are not small entities for purposes of the RFA.\5\
Therefore, the Acting Chairman, on behalf of the Commission, hereby
certifies, pursuant to 5 U.S.C. 605(b), that the action taken herein
will not have a significant economic impact on a substantial number of
small entities. The Commission also notes in this regard that the final
rules will raise speculative limit levels and thereby reduce the
regulatory burden on all affected entities.

    \5\ 47 FR 18618 (April 30, 1982).


B. Paperwork Reduction Act

    The final rule and its associated information collection
requirements have been reviewed and approved by the Office of
Management and Budget pursuant to the Paperwork Reduction Act of 1995,
44 U.S.C. 3507(d), under control numbers 3038-0009 and 3038-0013. An
agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless it displays a currently
valid control number. In the notice of proposed rulemaking, the
Commission estimated the paperwork burden that would be imposed by the
rules and sought comments on the estimates. No comments were received
in response to this request.

List of Subjects in 17 CFR Part 150

    Agricultural commodities, Bona fide hedge positions, Commodity
futures, Cotton, Grains, Position limits, Spread exemptions.

In consideration of the foregoing, pursuant to the authority contained
in the Commodity Exchange Act, the Commission hereby proposes to amend
part 150 of chapter I of title 17 of the Code of Federal Regulations as


1. The authority citation for part 150 is revised to read as follows:

    Authority: 7 U.S.C. 6a, 6c, and 12a(5), as amended by the
Commodity Futures Modernization Act of 2000, Appendix E of Pub. L.
106-554, 114 Stat. 2763 (2000).

2. Section 150.2 is revised to read as follows:

Sec.  150.2  Position limits.

    No person may hold or control positions, separately or in
combination, net long or net short, for the purchase or sale of a
commodity for future delivery or, on a futures-equivalent basis,
options thereon, in excess of the following:

                       Speculative Position Limits
                           [In contract units]
           Contract              Spot month   Single month    All months
                         Chicago Board of Trade
Corn and Mini-Corn \1\........          600          13,500       22,000
Oats..........................          600           1,400        2,000
Soybeans and Mini-Soybeans \1\          600           6,500       10,000
Wheat and Mini-Wheat \1\......          600           5,000        6,500
Soybean Oil...................          540           5,000        6,500
Soybean Meal..................          720           5,000        6,500
                       Minneapolis Grain Exchange
Hard Red Spring Wheat.........          600           5,000        6,500
                         New York Board of Trade
Cotton No. 2..................          300           3,500        5,000
                       Kansas City Board of Trade
Hard Winter Wheat.............          600           5,000       6,500
\1\ For purposes of compliance with these limits, positions in the
  regular sized and mini-sized contracts shall be aggregated.

[[Page 24707]]

    Issued by the Commission this 6th day of May, 2005, in
Washington, DC.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 05-9383 Filed 5-10-05; 8:45 am]