Cadwalader attorneys reviewed the CFTC's approved supplement ("Supplemental Proposal") to its December 2013 proposal to establish position limits on futures and economically equivalent swaps. They emphasized that the primary focus of the Supplemental Proposal is on the definition of bona fide hedging positions that are exempt from speculative position limits. The CFTC proposes to expand the definition of bona fide hedging to include commercial hedging strategies. The attorneys emphasized that the Supplemental Proposal relieves designated contract markets and swap execution facilities separately of the requirement to establish speculative position limits in certain limited circumstances. The Supplemental Proposal includes a 30-day public comment period that will begin once the proposal is published in the Federal Register. The attorneys expect publication to occur in June 2016.
Although the Supplemental Proposal provides more flexibility in order to accommodate hedging, it also retains the CFTC's role in reviewing the decisions of the exchanges. The attorneys noted that the CFTC failed to address its extensive filing requirements for market participants that rely on a bona fide hedge exemption, and recommended the following remedy:
Given the application requirements discussed in the Supplemental Proposal, the [CFTC] should consider streamlining the various forms from the 2013 Position Limits Proposal to prevent redundant, burdensome and unnecessary filing requirements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
