[Federal Register Volume 70, Number 90 (Wednesday, May 11, 2005)]
[Rules and Regulations]
[Pages 24705-24707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-9383]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 150

RIN 3038-AC24


Revision of Federal Speculative Position Limits

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (Commission) is 
amending Commission regulation 150.2 to increase the speculative 
position limit levels for all single-month and all-months-combined 
positions subject to such limits. In addition, the Commission is making 
other clarifying amendments concerning the aggregation of positions 
when a Designated Contract Market (DCM) trades two or more contracts 
with substantially identical terms, and is deleting several obsolete 
provisions in part 150 that relate to contracts that are no longer 
listed for trading or to DCMs that no longer exist.

DATES: Effective June 10, 2005.

FOR FURTHER INFORMATION CONTACT: Clarence Sanders, Attorney, Division 
of Market Oversight, Commodity Futures Trading Commission, Three 
Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581, 
telephone (202) 418-5068, facsimile number (202) 418-5507, electronic 
mail [email protected]; or Martin Murray, Economist, Division of Market 
Oversight, telephone (202) 418-5276, facsimile number (202) 418-5507, 
electronic mail [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    On March 15, 2005 (70 FR 12621), the Commission published proposed 
amendments to Commission regulation 150.2 to increase the speculative 
position limit levels for single-month and all-months-combined 
positions for CBT Corn, Oats, Soybeans, Wheat, Soybean Oil, and Soybean 
Meal; MGE Hard Red Spring Wheat; KCBT Hard Winter Wheat, and NYBOT 
Cotton No. 2.\1\ The spot month limits for all of these commodities 
would remain unchanged. The Commission also proposed to clarify in 
regulation 150.2 its practice of aggregating traders' positions for 
purposes of ascertaining compliance with Federal speculative position 
limits when a DCM lists for trading two or more contracts with 
substantially identical terms based on the same underlying commodity 
characteristics. Finally, the Commission proposed to delete several 
obsolete provisions in part 150 that relate to contracts that are no 
longer listed for trading or to DCMs that no longer exist.\2\
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    \1\ Commission regulation 150.2 imposes three types of position 
limits for each specified contract: a spot-month limit, a single-
month limit that applies to each non-spot month, and an all-months-
combined limit.
    \2\ Commission regulation 150.2 currently includes Federal 
speculative position limits for agricultural commodities traded on 
the MidAmerica Commodity Exchange (MidAm) and for the white wheat 
futures contract traded on MGE. These provisions relating to the 
MidAm and the MGE white wheat futures contract are obsolete and will 
be repealed as part of this action. In addition, reference to the 
New York Cotton Exchange is being changed to NYBOT to reflect a 
change in corporate organization.
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II. Final Rules

    The Commission is adopting as final rules without additional 
amendment the revisions to the speculative position limit levels that 
were set forth in the proposed rulemaking. This action is based upon 
its experience in administering these limits and after carefully 
considering the comments received in response to the notice of proposed 
rulemaking.
    Thirteen comment letters were received in response to the proposed 
rulemaking, all but one of which was in favor. Favorable comments were 
submitted by representatives of agricultural trade or producer 
organizations, in particular the American Farm Bureau Federation (AFBF) 
and the National Farmers Union (NFU) who filed a joint statement, the 
National Grain Trade Council, and the National Grain and Feed 
Association; two DCMs, the Minneapolis Grain Exchange and the Chicago 
Board of Trade; and several entities representing the views of hedge 
fund managers, particularly the Managed Funds Association, Eclipse 
Capital, Campbell & Company, Rotella Capital Management, Chesapeake 
Capital Corporation, John W. Henry & Co., and Graham Capital 
Management. Most of the favorable comments supported the proposed 
higher limits as a desirable interim step towards the ultimate 
abolition of Federal limits, although the AFBF and NFU supported both 
the higher limits and the continued retention of Federal limits 
indefinitely. In this regard, as the Commission noted in its proposed 
rulemaking, while the Commission has determined at this time to retain 
Federal speculative position limits at the increased levels contained 
herein, the Commission intends to continue its review of its current 
policies regarding the administration of speculative position limits, 
including a further evaluation of the merits of retaining Federal 
speculative limits.
    The American Cotton Shippers Association (ACSA) opposed the 
proposed increase in the single-month and all-months combined limits 
for cotton. In particular, ACSA noted that the NYBOT has proposed, in 
consultation with its cotton committee, the establishment of its own, 
exchange-set speculative position limits for the cotton No. 2 futures 
and option contracts. The NYBOT's proposed limits of 2,500 futures-
equivalent contracts for single months and 4,000 futures-equivalent 
contracts for all months combined are lower than those to be adopted by 
the Commission in this rulemaking. Accordingly, ACSA expressed the view 
that the Commission should adopt in part 150 of the Commission's 
regulations the NYBOT's proposed lower levels.\3\
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    \3\ In an August 3, 2004, letter, the NYBOT submitted for 
Commission approval proposed speculative position limit rules for 
the cotton No. 2 futures and option contracts pursuant to Section 
5c(c)(2) of the Commodity Exchange Act, and Commission regulation 
40.4. At that time, the NYBOT also agreed to extend the Commission's 
time to review and approve the amendments until such time as the 
Commission should implement amendments to Commission regulation 
150.2.
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    The Commission has taken this view into account but nevertheless 
believes that the limit levels it has proposed for the NYBOT cotton No. 
2 futures and option contracts under part 150 of the Commission's 
regulations are appropriate and that no change from its proposed 
rulemaking is necessary for several reasons. First, the Commission has 
applied consistent criteria in setting Federal speculative limits for 
all commodities subject to those limits, and it believes that it should 
continue this policy. Accordingly, the all-months-combined speculative 
position limit levels adopted herein, including the limit for the 
cotton No. 2 futures contract, were set according to the Commission's 
long standing and well-established formula that takes into

[[Page 24706]]

account open interest levels in the underlying futures and option 
markets, and the single-month levels adopted herein for each commodity 
were set to maintain the existing ratio between all-months-combined and 
single-month levels. In addition, the Commission notes that most 
comments made to the proposed rulemaking endorsed the Commission's 
approach for setting the single-month and all-months-combined 
speculative position limit levels. Finally, the Commission notes that 
DCMs may set speculative position limits at levels lower than 
Commission-specified levels, and that such lower levels would 
necessarily apply to all position holders. Thus, for the cotton No. 2 
contracts, the applicable limits would be the lower levels that the 
NYBOT proposes to adopt, consistent with the comments expressed by the 
ACSA. In this regard, it is the Commission's expressed policy to review 
and approve, where appropriate, all speculative position limit 
provisions adopted by DCMs, and furthermore that a violation of 
contract market position limits that have been approved by the 
Commission is also a violation of section 4a(e) of the Act.\4\
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    \4\ See Appendix B to part 38 of the Commission's regulations, 
pertaining to Acceptable Practices under Core Principle 5 for DCMs.
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    In addition, the Commission is making other clarifying amendments 
concerning the aggregation of positions when a Designated Contract 
Market (DCM) trades two or more contracts with substantially identical 
terms. No comments were received in opposition to this clarification.

III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
requires Federal agencies, in proposing rules, to consider the impact 
of those rules on small businesses. The Commission believes that the 
rule amendments to raise Commission speculative position limits would 
only impact large traders. The Commission has previously determined 
that large traders are not small entities for purposes of the RFA.\5\ 
Therefore, the Acting Chairman, on behalf of the Commission, hereby 
certifies, pursuant to 5 U.S.C. 605(b), that the action taken herein 
will not have a significant economic impact on a substantial number of 
small entities. The Commission also notes in this regard that the final 
rules will raise speculative limit levels and thereby reduce the 
regulatory burden on all affected entities.
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    \5\ 47 FR 18618 (April 30, 1982).

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B. Paperwork Reduction Act

    The final rule and its associated information collection 
requirements have been reviewed and approved by the Office of 
Management and Budget pursuant to the Paperwork Reduction Act of 1995, 
44 U.S.C. 3507(d), under control numbers 3038-0009 and 3038-0013. An 
agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a currently 
valid control number. In the notice of proposed rulemaking, the 
Commission estimated the paperwork burden that would be imposed by the 
rules and sought comments on the estimates. No comments were received 
in response to this request.

List of Subjects in 17 CFR Part 150

    Agricultural commodities, Bona fide hedge positions, Commodity 
futures, Cotton, Grains, Position limits, Spread exemptions.

0
In consideration of the foregoing, pursuant to the authority contained 
in the Commodity Exchange Act, the Commission hereby proposes to amend 
part 150 of chapter I of title 17 of the Code of Federal Regulations as 
follows:

PART 150--LIMITS ON POSITIONS

0
1. The authority citation for part 150 is revised to read as follows:

    Authority: 7 U.S.C. 6a, 6c, and 12a(5), as amended by the 
Commodity Futures Modernization Act of 2000, Appendix E of Pub. L. 
106-554, 114 Stat. 2763 (2000).

0
2. Section 150.2 is revised to read as follows:


Sec.  150.2  Position limits.

    No person may hold or control positions, separately or in 
combination, net long or net short, for the purchase or sale of a 
commodity for future delivery or, on a futures-equivalent basis, 
options thereon, in excess of the following:

                       Speculative Position Limits
                           [In contract units]
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           Contract              Spot month   Single month    All months
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                         Chicago Board of Trade
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Corn and Mini-Corn \1\........          600          13,500       22,000
Oats..........................          600           1,400        2,000
Soybeans and Mini-Soybeans \1\          600           6,500       10,000
Wheat and Mini-Wheat \1\......          600           5,000        6,500
Soybean Oil...................          540           5,000        6,500
Soybean Meal..................          720           5,000        6,500
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                       Minneapolis Grain Exchange
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Hard Red Spring Wheat.........          600           5,000        6,500
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                         New York Board of Trade
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Cotton No. 2..................          300           3,500        5,000
-------------------------------
                       Kansas City Board of Trade
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Hard Winter Wheat.............          600           5,000       6,500
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\1\ For purposes of compliance with these limits, positions in the
  regular sized and mini-sized contracts shall be aggregated.



[[Page 24707]]

    Issued by the Commission this 6th day of May, 2005, in 
Washington, DC.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 05-9383 Filed 5-10-05; 8:45 am]
BILLING CODE 6351-01-M