MFA Blog

MFA Submits Comments to CFTC on Position Limits Proposal

Posted on February 10, 2014

Yesterday, MFA submitted comments to the CFTC on its position limits for derivatives proposal.  In MFA’s view, the Commission has not fulfilled its statutory obligation to make a necessity finding that position limits are necessary or appropriate.  Rulemaking related to position limits should be empirically driven and not a response to popular sentiment or partial analyses.  While MFA disagrees with the Commission on the need for position limits, we provided the following comments to its proposed position limits rule:

  • The Commission should provide clear guidance on referenced contracts and the economic equivalence determination;
  • The Commission should address the computational challenges for options;
  • Position limits should be based on current estimated deliverable supply data and transparency;
  • The Commission should not impose position limits for cash-settled contracts and, in the alternative, position limits for cash-settled contracts should not be based on estimated deliverable supply;
  • In lieu of the proposed conditional spot-month position limit, MFA believes the best alternative would be for the Commission to set the limit for cash-settled contracts at five times the level of the limit for the physical-delivery core referenced futures contract regardless of positions in the underlying physical-delivery contract; and
  • The one-size-fits-all approach to setting non-spot month and all-months-combined limits fails to incorporate market realities unique to specific commodities.