Indiana Grain Company, LLC

Posted: 09/22/11

By: tomgrisafi

The Commodity Futures Trading Commission looks all but certain to approve the CME Group's petition to increase grain position limits by as much as 85 percent in a final draft rule for controversial curbs on trading.

A vote on the rule is tentatively slated for Oct. 4. If passed, it could take effect about 60 days later.

As our friends at Crain's reported last night, agricultural markets have long been subject to the kind of federal position caps that up to now have not been applied to energy and metals markets. The rules governing how those margins are applied will be superseded by the new rules 60 days after the CFTC defines the word "swap."

The new set of rules, among other things, differs from existing policy on agricultural contracts because it includes swaps positions, tightens hedging exemptions and allows for more regular adjustment in margins based on open interest, rather than based on an exchange's specific requests.

The 238-page document could still be subject to change, especially as the five-member commission and its staff have been divided on how to craft the rule.

The rulemaking is part of a broader push by the agency to overhaul the $600 trillion over-the-counter swaps market under the sweeping Dodd-Frank financial law enacted in July 2010.

Limits will rise by some 23 to 85 percent from current levels for grain futures and options contracts, based on combined holdings for each trader in all futures deliveries.

Position limits will be raised in tandem for Kansas City Board of Trade and the Minneapolis Grain Exchange wheat contracts, to continue CFTC's aim of "parity" for those markets with the leading CME contract.

Source: Crains

Be the first to comment on this blog!