CFTC Approves Position Limits Proposal for Derivatives

On January 13, 2011, the Commodity Futures Trading Commission ("CFTC") approved a Notice of Proposed Rulemaking ("NOPR") regarding the imposition of federally-mandated position limits for derivatives, including swaps, under the CFTC's new authority over derivatives markets pursuant to the Dodd Frank Act. At its last meeting in December, the CFTC had to table the same proposal after Commissioner Chilton voiced concerns that it did not go far enough in imposing position limits, and Commissioners Sommers and O'Malia voiced opposition to the plan.

The proposal approved by the CFTC on January 13 would impose position limits on physical delivery futures contracts and their "economically equivalent" derivatives (including swaps) in two phases: First, spot-month position limits only, based on deliverable supply determined by designated contract markets such as NYMEX; and second, spot-month position limits based on the Commission's determination of deliverable supply, and