Pigs Fly: We now have Federal Position Limits (Dodd Frank Limits)

We admit.  We said it. “Dodd-Frank limits will never happen.”   Well, foot please meet mouth. The CFTC just passed Dodd-Frank limits.   This has to be one of the most active (and productive) Commissions we have ever seen.  In the past month they dropped both the re-write of Dodd Frank Reporting (couldn’t come soon enough) and Dodd Frank Limits (thought it would never happen).   It’s 899 pages of rulemaking.  But here is what you need to know: The First Big Takeaway: 25 Core Contracts Federal limits apply to the 25 core “referenced contracts” (list below); Federal limits apply to the futures and options contracts directly or indirectly linked to the core referenced products; and Economically equivalent swaps. The interpretation put forth by the Commission is, however, fairly narrow in terms of product inclusion. ‘Referenced contract,’ however, explicitly excludes location basis contracts, commodity index contracts, contracts that are based on prices across a month (i.e., contracts commonly referred to as calendar month average contracts, trade month average contracts, or balance of month contracts), outright contracts that are based on a price reporting agency index price, swap guarantees, and trade options that meet certain requirements. Similarly, the inclusion of swaps only deals… continue reading

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