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Commodity Futures Trading Commission (CFTC) Makes Second Attempt at Imposing Position Limits on Key Energy Commodities

The Commodity Futures Trading Commission (CFTC) voted today to approve a revised ‎‎"position limits" rule intended to limit speculation in derivatives markets for certain energy, ‎agriculture, and metals commodities. The CFTC wants to limit the number of futures contracts a ‎single trader can hold, although a prior rule was vacated by the D.C. District Court in September ‎‎2012. The four categories of energy contracts covered by the rule are: (1) NYMEX Henry Hub ‎Natural Gas; (2) NYMEX Light Sweet Crude Oil; (3) NYMEX RBOB Gasoline; and (4) ‎NYMEX NY Harbor ULSD (heating oil).‎

Under the proposed rule, a firm would be prohibited from holding speculative positions in any ‎one of 28 core physical commodity contracts and their "economically equivalent" futures, ‎options, and swaps. Exceptions are available for "bona fide hedging positions" as well as "‎“positions that are established in good faith prior to the effective date" of the subject regulations. ‎The Commissioners who voted for the rule believe it will prevent manipulation of commodities ‎markets and is required under the Dodd-Frank act from 2010.‎

The actual regulations in the proposed rule seem very similar to the rule rejected by the District ‎Court last year. The main difference is a better justification for the rule, including an improved ‎cost-benefit analysis.‎ The rule will almost certainly be challenged in court by Wall Street interests and its chances of success are uncertain at this point.

The CFTC will now conduct a public comment session before finalizing the rule.‎

Read more about this rulemaking here and here.‎

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As a regulatory lawyer, Matt helps public and private companies successfully interface with ‎government agencies. He mostly focuses on permitting, siting, compliance, and enforcement matters, ‎especially those impacting the mining, energy, construction, and utility industries.‎ 

Leveraging his background in engineering, Matt approaches every project as if he’s solving a puzzle. He ‎thrives on identifying and analyzing all of the pieces and then systematically putting each piece in its ‎proper place to create the best possible result for his client. Whether working with clients or ‎...

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