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New CFTC Rules - Know Your Position Limits

2 mins
Posted on Dec 6 2021 by Liam Driscoll

Summary of the upcoming CFTC’s Final Rule changes. Includes new federal spot month position limits, updates to exchange-set limits and rules on economically equivalent swaps.

Earlier this year, the CFTC published the Final Rule in the Federal Register, outlining changes to its position limit rules. While the first of these, concerning legacy agricultural contracts, came into effect on the 15th of March, the majority are set to take effect on the 1st January 2022


So, what’s changing?

The number of core referenced futures contracts subject to federal position limits is expanding. There are currently 9 core referenced futures contracts, which are legacy agricultural contracts. This number is growing to 25 core referenced futures contracts including an expansion of agricultural contracts and the inclusion of metals and energy contracts for the first time. 

What is more, firms will also be tasked with monitoring contracts that reference the 25 core futures contracts and will be required to aggregate their exposures across various contracts and across different exchanges, adding an additional challenge when monitoring exposures on US exchanges. There are 600+ contracts that fit the bill which is outlined in the CFTC Staff Workbook

To find out more about what these changes involve, check out our blog post The Final Rule: Updates to the CFTC’s Federal Position Limits.

Exchange Limits:

To clarify, federal position limits are separate from exchange-imposed limits and both sets of limits must be adhered to in order to remain compliant. The Final Rule establishes exchange-set position limits and exemptions, as well as data sharing between exchanges and the CFTC. We provide the details in our blog post How does the CFTC’s Final Rule on Position Limits impact US exchanges?

Economically equivalent swaps:

Under the new rules, the CFTC will also be calling on firms to include economically equivalent swaps in calculations from 1st January 2023. Find out more in our blog post CFTC Federal Position Limits on Economically Equivalent Swaps.

These changes, along with the recent fines issued by the CFTC, show the CFTC’s ongoing intent to ensure derivative trading is being afforded adequate protections. That said, these changes will bring increasing complexity for firms trading derivatives on US exchanges and who have to monitor their exposures vs. position limits. If you’d like more information on these changes, download our webinar CFTC Rule Changes & Cross- Exchange Limits.

If you’d like to have all of these updates reflected for you in an automated Position Limits monitoring service, saving time and reducing operational risk, then get in touch