WASHINGTON, DC, US — After years of work the National Grain and Feed Association (NGFA) said the Commodity Futures Trading Commission’s (CFTC) rule on speculative position limits across a range of commodities and futures contracts has improved but still has a few concerns.
In general, the NGFA supports the proposal and commends the improvements made to come closer to an achievable approach for the grain, feed and processing industry over the year.
Since the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 the CFTC has worked to finalize rules for position limits. The NGFA worked with the commission over the years but raised some concerns on May 15 by submitting an official statement to the CFTC, including:
- Spot-month limits: The NGFA said it supports increased spot-month limits for grain and oilseed contracts, up to 1,200 contracts compared to the current spot-month limit of 600, but with the admonition that the CFTC and the CME Group should monitor implementation closely and make adjustments if convergence between futures and cash markets is threatened.
- Non-spot month limits: Rather than endorse very large increases in single-month and all-months-combined limits, the NGFA recommends that the CFTC maintain relatively lower single-month limits to prevent too much volume from becoming concentrated in nearby non-spot months. In addition, the NGFA supports providing authority for exchanges to implement limits lower than federal limits as merited for individual contracts and various commodities.
- Enumerated bona fide hedges: The CFTC proposal expands the range of hedging strategies recognized by the agency as bona fide hedges. The NGFA urges the CFTC to make one additional hedging strategy enumerated in the final rule; that is, using a futures calendar spread to hedge an unfixed price basis purchase or sale.
- Non-enumerated hedge exemption process: The NGFA recommends the CFTC to reduce its review period to two days for both hedging needs known in advance and for sudden or unforeseen needs. The association also seeks clarification from the CFTC as to whether a market participant may take a position based upon the exchange’s determination during the review period without fear of CFTC penalties for a position limit infraction.