Attorney Advertising
CFTC Adopts Final Rule Regarding
Speculative Position Limits
December 22, 2020
On October 15, the Commodity Futures Trading Commission (CFTC or the Commission) adopted
final rules imposing speculative position limits in derivative contracts referencing 25 agricultural,
metals and energy commodities (the Final Rules). These limits are the culmination of almost a
decade of work from the Commission and its staff, including revising the rules after a federal court
vacated its last attempt to expand speculative position limits in 2012.
The Final Rules are intended to “prevent excessive speculation” and broadly apply to positions in
futures, options and economically equivalent swaps referencing the covered commodities (Covered
Contracts). The Final Rules approach the exemption for bona fide hedges flexibly, to
“accommodate potential future, unpredictable developments in commercial hedging practices.” This
is in contrast to previous rule proposals, which were both more prescriptive and restrictive. The
Final Rules also exempt certain recognized spread transactions.
Although the Final Rules have a relatively distant compliance date (January 1, 2022, for futures
contracts in the 16 commodities not subject currently to federal limits and January 1, 2023, for
economically equivalent swaps), market participants should familiarize themselves with the Final
Rules and their exemptions because many participants and intermediaries will likely find it
necessary to establish internal control procedures, which may require systems development in
advance of the Final Rules’ compliance date. The Commission has long prioritized enforcement
actions based on violations of existing federal and exchange-set position limits, and we expect this
focus to continue with the adoption of this broadened speculative position limits regime.
I. Relevant Background
Since its adoption in 1936, Section 4a of the of the Commodity Exchange Act has authorized the
Commission to impo se speculative position limits. 1 Section 737 of the 2008 Dodd-Frank Wall Street
Reform and Consumer Protection Act amended Section 4a to expand the Commission’s authority
to impose speculative positions limits “as necessary.” The CFTC first attempted to adopt rules
under this new authority in 2011.2 However, these rules were largely vacated by a federal court in
2012, after the court found the Commission had not appropriately determined that the position
limits adopted were necessary to advance the statute’s goals.3
2 See Position Limits for Futures and Swaps, 76 Fed. Reg., 71,626 (Nov. 18, 2011).
3 See ISDA v. CFTC, 887 F. Supp. 2d 259 (D.D.C. 2012).
