CFTC Proposes Rule On Speculative Position Limits For Energy Contracts

Invoking its authority under Section 4a(a) of the Commodity Exchange Act of 1936 (CEA), on January 14, 2010, the Commodity Futures Trading Commission (CFTC) in a 4-1 vote issued a proposed rule to establish speculative position limits for certain energy contracts traded on CFTC reporting markets. The proposed rule would establish aggregate and exchange-specific position limits to economically similar contracts that are traded on the New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE). Affected contracts and commodities include: Henry Hub Natural Gas, Light Sweet Crude Oil (WTI), New York Harbor No. 2 Heating Oil, and New York Harbor Gasoline Blendstock (RBOB). The CFTC proposes to exempt from the position limits bona fide hedging transactions and certain swap dealer risk management transactions. Comments on the proposed rule are due 90 days after the rule's publication in the Federal Register, likely in mid to late April.