Commodity Position Limits After Dodd-Frank

.—For exempt commodities, the limits required under subparagraph (A) shall be established within 180 days after the date of the enactment of this paragraph.

‘‘(ii) AGRICULTURAL COMMODITIES.—For agricultural commodities, the limits required under subparagraph (A) shall be established within 270 days after the date of the enactment of this paragraph.

‘‘(C) GOAL.—In establishing the limits required under subparagraph (A), the Commission shall strive to ensure that trading on foreign boards of trade in the same commodity will be subject to comparable limits and that any limits to be imposed by the Commission will not cause price discovery in the commodity to shift to trading on the foreign boards of trade.

‘‘(3) SPECIFIC LIMITATIONS.—In establishing the limits required in paragraph (2), the Commission, as appropriate, shall set limits—

‘‘(A) on the number of positions that may be held by any person for the spot month, each other month, and the aggregate number of positions that may be held by any person for all months; and

‘‘(B) to the maximum extent practicable, in its discretion—

‘‘(i) to diminish, eliminate, or prevent excessive speculation as described under this section;

‘‘(ii) to deter and prevent market manipulation, squeezes, and corners;

‘‘(iii) to ensure sufficient market liquidity for bona fide hedgers; and

‘‘(iv) to ensure that the price discovery function of the underlying market is not disrupted.

Section 4a(a)(6) of the Commodity Exchange Act

‘‘(6) AGGREGATE POSITION LIMITS.—The Commission shall, by rule or regulation, establish limits (including related hedge exemption provisions) on the aggregate number or amount of positions in contracts based upon the same underlying commodity (as defined by the Commission) that may be held by any person, including any group or class of traders, for each month across—

‘‘(A) contracts listed by designated contract markets;

‘‘(B) with respect to an agreement contract, or transaction that settles against any price (including the daily or final settlement price) of 1 or more contracts listed for trading on a registered entity, contracts traded on a foreign board of trade that provides members or other participants located in the United States with direct access to its electronic trading and order matching system; and

‘‘(C) swap contracts that perform or affect a significant price discovery function with respect to regulated entities.

Section 4a(a)(7) of the Commodity Exchange Act

‘‘(7) EXEMPTIONS.—The Commission, by rule, regulation, or order, may exempt, conditionally or unconditionally, any person or class of persons, any swap or class of swaps, any contract of sale of a commodity for future delivery or class of such contracts, any option or class of options, or any transaction or class of transactions from any requirement it may establish under this section with respect to position limits.’’.

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Other related hedge fund law articles:

• CTA and CPO Registration
• Starting a Hedge Fund

Mallon P.C. provides legal support and futures and commodities compliance services to all types of investment managers.  Bart Mallon, Esq. can be reached directly at 415-868-5345.