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.