[Title 17 CFR 150]
[Code of Federal Regulations (annual edition) - April 1, 2003 Edition]
[Title 17 - COMMODITY AND SECURITIES EXCHANGES]
[Chapter I - COMMODITY FUTURES TRADING COMMISSION]
[Part 150 - LIMITS ON POSITIONS]
[From the U.S. Government Printing Office]
17COMMODITY AND SECURITIES EXCHANGES12003-04-012003-04-01falseLIMITS ON POSITIONS150PART 150COMMODITY AND SECURITIES EXCHANGESCOMMODITY FUTURES TRADING COMMISSION
PART 150--LIMITS ON POSITIONS--Table of Contents
Sec.
150.1 Definitions.
150.2 Position limits.
150.3 Exemptions.
150.4 Aggregation of positions.
150.5 Exchange-set speculative position limits.
150.6 Responsibility of contract markets.
Authority: 7 U.S.C. 6a, 6c and 12a(5).
Source: 52 FR 38923, Oct. 20, 1987, unless otherwise noted.
Sec. 150.1 Definitions.
As used in this part--
(a) Spot month means the futures contract next to expire during that
period of time beginning at the close of trading on the trading day
preceding the first day on which delivery notices can be issued to the
clearing organization of a contract market.
(b) Single month means each separate futures trading month, other
than the spot month future.
[[Page 542]]
(c) All-months means the sum of all futures trading months including
the spot month future.
(d) Eligible entity means--
A commodity pool operator, the operator of a trading vehicle which
is excluded or who itself has qualified for exclusion from the
definition of the term ``pool'' or commodity pool operator,''
respectively, under Sec. 4.5 of this chapter; the limited partner or
shareholder in a commodity pool the operator of which is exempt from
registration under Sec. 4.13 of this chapter; a commodity trading
advisor; a bank or trust company; a savings association; an insurance
company; or the separately organized affiliates of any of the above
entities:
(1) Which authorizes an independent account controller independently
to control all trading decisions for positions it holds directly or
indirectly, or on its behalf, but without its day-to-day direction; and
(2) Which maintains:
(i) Only such minimum control over the independent account
controller as is consistent with its fiduciary responsibilities and
necessary to fulfill its duty to supervise diligently the trading done
on its behalf; or
(ii) If a limited partner or shareholder of a commodity pool the
operator of which is exempt from registration under Sec. 4.13 of this
chapter, only such limited control as is consistent with its status.
(e) Independent account controller means a person--
(1) Who specifically is authorized by an eligible entity, as defined
in paragraph (d) of this section, independently to control trading
decisions on behalf of, but without the day-to-day direction of, the
eligible entity;
(2) Over whose trading the eligible entity maintains only such
minimum control as is consistent with its fiduciary responsibilities to
fulfill its duty to supervise diligently the trading done on its behalf
or as is consistent with such other legal rights or obligations which
may be incumbent upon the eligible entity to fulfill;
(3) Who trades independently of the eligible entity and of any other
independent account controller trading for the eligible entity;
(4) Who has no knowledge of trading decisions by any other
independent account controller; and
(5) Who is registered as a futures commission merchant, an
introducing broker, a commodity trading advisor, an associated person or
any such registrant, or is a general partner of a commodity pool the
operator of which is exempt from registration under Sec. 4.13 of this
chapter.
(f) Futures-equivalent means an option contract which has been
adjusted by the previous day's risk factor, or delta coefficient, for
that option which has been calculated at the close of trading and
published by the applicable exchange under Sec. 16.01 of this chapter.
(g) Long position means a long call option, a short put option or a
long underlying futures contract.
(h) Short position means a short call option, a long put option or a
short underlying futures contract.
(i) For the following commodities, the first delivery month of the
``crop year'' is as follows:
------------------------------------------------------------------------
Commodity Beginning delivery month
------------------------------------------------------------------------
corn...................................... December.
cotton.................................... October.
oats...................................... July.
soybeans.................................. September.
soybean meal.............................. October.
soybean oil............................... October.
wheat (spring)............................ September.
wheat (winter)............................ July.
------------------------------------------------------------------------
[52 FR 38923, Oct. 20, 1987, as amended at 53 FR 41571, Oct. 24, 1988;
56 FR 14315, Apr. 9, 1991; 57 FR 44492, Sept. 28, 1992; 58 FR 17981,
Apr. 7, 1993; 64 FR 24046, May 5, 1999]
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:
[[Page 543]]
Speculative Position Limits,
[By contract]
------------------------------------------------------------------------
Limits by number of contracts
--------------------------------------
Contract Single
Spot month month All months
------------------------------------------------------------------------
Chicago Board of Trade
------------------------------------------------------------------------
Corn............................. 600 5,500 9,000
Oats............................. 600 1,000 1,500
Soybeans......................... 600 3,500 5,500
Wheat............................ 600 3,000 4,000
Soybean Oil...................... 540 3,000 4,000
Soybean Meal..................... 720 3,000 4,000
MidAmerica Commodity Exchange
------------------------------------------------------------------------
Corn............................. 3,000 6,000 6,000
Oats............................. 2,000 2,000 2,000
Soybeans......................... 3,000 6,000 6,000
Wheat............................ 3,000 6,000 6,000
Soybean Meal..................... 800 800 800
Minneapolis Grain Exchange
------------------------------------------------------------------------
Hard Red Spring Wheat............ 600 3,000 4,000
White Wheat...................... 600 1,200 1,200
New York Cotton Exchange
------------------------------------------------------------------------
Cotton No. 2..................... 300 2,500 3,500
Kansas City Board of Trade
------------------------------------------------------------------------
Hard Winter Wheat................ 600 3,000 4,000
------------------------------------------------------------------------
[64 FR 24047, May 5, 1999]
Sec. 150.3 Exemptions.
(a) Positions which may exceed limits. The position limits set forth
in Sec. 150.2 of this part may be exceeded to the extent such position
are:
(1) Bona fide hedging transactions as defined in Sec. 1.3(z) of this
chapter;
(2) [Reserved]
(3) Spread or arbitrage positions between single months of a futures
contract and/or, on a futures-equivalent basis, options thereon, outside
of the spot month, in the same crop year; provided however, That such
spread or arbitrage positions, when combined with any other net
positions in the single month, do not exceed the all-months limit set
forth in Sec. 150.2; or
(4) Carried for an eligible entity as defined in Sec. 150.1(d), in
the separate account or accounts of an independent account controller,
as defined in Sec. 150.1(e), and not in the spot month if there is a
position limit which applies to individual trading months during their
expiration; Provided, however, That the overall positions held or
controlled by each such independent account controller may not exceed
the limits specified in Sec. 150.2.
(i) Additional Requirements for Exemption of Affiliated Entities. If
the independent account controller is affiliated with the eligible
entity or another independent account controller, each of the affiliated
entities must:
(A) Have, and enforce, written procedures to preclude the affiliated
entities from having knowledge of, gaining access to, or receiving data
about, trades of the other. Such procedures must include document
routing and other procedures or security arrangements, including
separate physical locations, which would maintain the independence of
their activities; provided, however, That such procedures may provide
for the disclosure of information which is reasonably necessary for an
eligible entity to maintain the level of control consistent with its
fiduciary responsibilities and necessary to fulfill its duty to
supervise diligently the trading done on its behalf;
(B) Trade such accounts pursuant to separately-developed and
independent trading systems;
(C) Market such trading systems separately; and
[[Page 544]]
(D) Solicit funds for such trading by separate Disclosure Documents
that meet the standards of Sec. 4.24 or Sec. 4.34 of this chapter, as
applicable, where such Disclosure Documents are required under part 4 of
this chapter.
(ii) [Reserved]
(b) Call for information. Upon call by the Commission, the Director
of the Division of Market Oversight or the Director's delegee, any
person claiming an exemption from speculative position limits under this
section must provide to the Commission such information as specified in
the call relating to the positions owned or controlled by that person;
trading done pursuant to the claimed exemption; the futures, options or
cash market positions which support the claim of exemption; and the
relevant business relationships supporting a claim of exemption.
[53 FR 41571, Oct. 24, 1988, as amended at 56 FR 14315, Apr. 9, 1991; 57
FR 44492, Sept. 28, 1992; 58 FR 17982, Apr. 7, 1993; 60 FR 38193, July
25, 1995; 67 FR 62353, Oct. 7, 2002]
Sec. 150.4 Aggregation of positions.
(a) Positions to be aggregated. The position limits set forth in
Sec. 510.2 of this part shall apply to all positions in accounts for
which any person by power of attorney or otherwise directly or
indirectly holds positions or controls trading or to positions held by
two or more persons acting pursuant to an expressed or implied agreement
or understanding the same as if the positions were held by, or the
trading of the position were done by, a single individual.
(b) Ownership of accounts. For the purpose of applying the position
limits set forth in Sec. 510.2, except for the ownership interest of
limited partners, shareholders, members of a limited liability company,
beneficiaries of a trust or similar type of pool participant in a
commodity pool subject to the provisos set forth in paragraph (c) of
this section, any trader holding positions in more than one account, or
holding accounts or positions in which the trader by power of attorney
or otherwise directly or indirectly has a 10% or greater ownership or
equity interest, must aggregate all such accounts or positions.
(c) Ownership by limited partners, shareholders or other pool
participants. For the purpose of applying the position limits set forth
in Sec. 150.2:
(1) A commodity pool operator having ownership or equity interest of
10% or greater in an account or positions as a limited partner,
shareholder or other similar type of pool participant must aggregate
those accounts or positions with all other accounts or positions owned
or controlled by the commodity pool operator;
(2) A trader that is a limited partner, shareholder or other similar
type of pool participant with an ownership or equity interest of 10% or
greater in a pooled account or positions who is also a principal or
affiliate of the operator of the pooled account must aggregate the
pooled account or positions with all other accounts or positions owned
or controlled by that trader, provided, however, that the trader need
not aggregate such pooled positions or accounts if:
(i) The pool operator has, and enforces, written procedures to
preclude the trader from having knowledge of, gaining access to, or
receiving data about the trading or positions of the pool;
(ii) The trader does not have direct, day-to-day supervisory
authority or control over the pool's trading decisions; and
(iii) The trader, if a principal of the commodity pool operator,
maintains only such minimum control over the commodity pool operator as
is consistent with its responsibilities as a principal and necessary to
fulfill its duty to supervise the trading activities of the commodity
pool;
(3) Each limited partner, shareholder, or other similar type of pool
participant having an ownership or equity interest of 25% or greater in
a commodity pool the operator of which is exempt from registration under
Sec. 4.13 of this chapter must aggregate the pooled account or positions
with all other accounts or positions owned or controlled by that trader.
(d) Trading control by futures commission merchants. The position
limits set forth in Sec. 150.2 of this part shall be construed to apply
to all positions held by a futures commission merchant or its separately
organized affiliates in a discretionary account, or in an account
[[Page 545]]
which is part of, or participates in, or receives trading advice from a
customer trading program of a futures commission merchant or any of the
officers, partners, or employees of such futures commission merchant or
its separately organized affiliates, unless:
(1) A trader other than the futures commission merchant or the
afffilate directs trading in such an account;
(2) The futures commission merchant or the affiliate maintains only
such minimum control over the trading in such an account as is necessary
to fulfill its duty to supervise diligently trading in the account; and
(3) Each trading decision of the discretionary account or the
customer trading program is determined independently of all trading
decisions in other accounts which the futures commission merchant or the
affiliate holds, has a financial interest of 10% or more in, or
controls.
(e) Call for information. Upon call by the Commission, the Director
of the Division of Market Oversight or the Director's delegatee, any
person claiming an exemption under paragraphs (c) or (d) of this section
must provide to the Commission such information as specified in the call
relating to the positions owned or controlled by that person, trading
done pursuant to the claimed exemption, or the relevant business
relationships supporting a claim of exemption.
[64 FR 24047, May 5, 1999, as amended at 67 FR 62353, Oct. 7, 2002]
Sec. 150.5 Exchange-set speculative position limits.
(a) Exchange limits. Each contract market as a condition of
designation under part 5, appendix A, of this chapter shall be bylaw,
rule, regulation, or resolution limit the maximum number of contracts a
person may hold or control, 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. This section shall
not apply to a contract market for which position limits are set forth
in Sec. 150.2 of this part or for a futures or option contract market on
a major foreign currency, for which there is no legal impediment to
delivery and for which there exists a highly liquid cash market. Nothing
in this section shall be construed to prohibit a contract market from
fixing different and separate position limits for different types of
futures contracts based on the same commodity, or from fixing different
position limits for different futures or for different delivery months,
or from exempting positions which are normally known in the trade as
``spreads, straddles, or arbitrage,'' of from fixing limits which apply
to such positions which are different from limits fixed for other
positions.
(b) Levels at designation. At the time of its initial designation, a
contract market must provide for speculative position limit levels as
follows:
(1) For physical delivery contracts, the spot month limit level must
be no greater than one-quarter of the estimated spot month deliverable
supply, calculated separately for each month to be listed, and for cash
settled contracts, the spot month limit level must be no greater than
necessary to minimize the potential for manipulation or distortion of
the contract's or the underlying commodity's price;
(2) Individual nonspot or all-months-combined levels must be no
greater than 1,000 contracts for tangible commodities other than energy
products;
(3) Individual nonspot or all-months-combined levels must be no
greater than 5,000 contracts for energy products and nontangible
commodities, including contracts on financial products.
(c) Adjustments to levels. Contract markets may adjust their
speculative limit levels as follows:
(1) For physical delivery contracts, the spot month limit level must
be no greater than one-quarter of the estimated spot month deliverable
supply, calculated separately for each month to be listed, and for cash
settled contracts, the spot month limit level must be no greater than
necessary to minimize the potential for manipulation or distortion of
the contract's or the underlying commodity's price; and
(2) Individual nonspot or all-months-combined levels must be no
greater than 10% of the average combined futures and delta-adjusted
option month-end open interest for the most recent
[[Page 546]]
calendar year up to 25,000 contracts with a marginal increase of 2.5%
thereafter or be based on position sizes customarily held by speculative
traders on the contract market, which shall not be extraordinarily large
relative to total open positions in the contract, the breadth and
liquidity of the cash market underlying each delivery month and the
opportunity for arbitrage between the futures market and the cash market
in the commodity underlying the futures contract.
(d) Hedge exemption. (1) No exchange bylaw, rule, regulation, or
resolution adopted pursuant to this section shall apply to bona fide
hedging positions as defined by a contract market in accordance with
Sec. 1.3(z)(1) of this chapter. Provided, however, that the contract
market may limit bona fide hedging positions or any other positions
which have been exempted pursuant to paragraph (e) of this section which
it determines are not in accord with sound commercial practices or
exceed an amount which may be established and liquidated in an orderly
fashion.
(2) Traders must apply to the contract market for exemption from its
speculative position limit rules. In considering whether to grant such
an application for exemption, contract markets must take into account
the factors contained in paragraph (d)(1) of this section.
(e) Trader accountability exemption. Twelve months after a contract
market's initial listing for trading or at any time thereafter, contract
markets may submit for Commission approval under section 5a(a)(12) of
the Act and Sec. 1.41(b) of this chapter a bylaw, rule, regulation, or
resolution, substituting for the position limits required under
paragraphs (a), (b) and (c) of this section an exchange rule requiring
traders to be accountable for large positions as follows:
(1) For futures and option contracts on a financial instrument or
product having an average open interest of 50,000 contracts and an
average daily trading volume of 100,000 contracts and a very highly
liquid cash market, an exchange bylaw, regulation or resolution
requiring traders to provide information about their position upon
request by the exchange;
(2) For futures and option contracts on a financial instrument or
product or on an intangible commodity having an average moth-end open
interest of 50,000 and an average daily volume of 25,000 contracts and a
highly liquid cash market, an exchange bylaw, regulation or resolution
requiring traders to provide information about their position upon
request by the exchange and to consent to halt increasing further a
trader's positions if so ordered by the exchange;
(3) For futures and option contracts on a tangible commodity,
including but not limited to metals, energy products, or international
soft agricultural products, having an average month-end open interest of
50,000 contracts and an average daily volume of 5,000 contracts and a
liquid cash market, an exchange bylaw, regulation or resolution
requiring traders to provide information about their position upon
request by the exchange and to consent to halt increasing further a
trader's positions if so ordered by the exchange, provided, however,
such contract markets are not exempt from the requirement of paragraphs
(b) or (c) that they adopt an exchange bylaw, regulation or resolution
setting a spot month speculative position limit with a level no grater
than one quarter of the estimated spot month deliverable supply;
(4) For purposes of this paragraph, trading volume and open interest
shall be calculated by combining the month-end futures and its related
option contract, on a delta-adjusted basis, for all months listed during
the most recent calendar year.
(f) Other exemptions. Exchange speculative position limits adopted
pursuant to this section shall not apply to any position acquired in
good faith prior to the effective date of any bylaw, rule, regulation,
or resolution which specifies such limit or to a person that is
registered as a futures commission merchant or as a floor broker under
authority of the Act except to the extent that transactions made by such
person are made on behalf of or for the account or benefit of such
person. In addition to the express exemptions specified in this section,
a contract market may propose such other exemptions from the
requirements of this section
[[Page 547]]
consistent with the purposes of this section and shall submit such rules
Commission review under section 5a(1)(12) of the Act and Sec. 1.41(b) of
this chapter.
(g) Aggregation. In determining whether any person has exceeded the
limits established under this section, all positions in accounts for
which such person by power of attorney or otherwise directly or
indirectly controls trading shall be included with the positions held by
such person; such limits upon positions shall apply to positions held by
two or more person acting pursuant to an express or implied agreement or
understanding, the same as if the positions were held by a single
person.
[64 FR 24048, May 5, 1999]
Sec. 150.6 Responsibility of contract markets.
Nothing in this part shall be construed to affect any provisions of
the Act relating to manipulation or corners nor to relieve any contract
market or its governing board from responsibility under section 5(4) of
the Act to prevent manipulation and corners.
[52 FR 38923, Oct. 20, 1987, as amended at 59 FR 5528, Feb. 7, 1993]