News Release

CME Group Provides Recommendations for Establishing Position Limits for Energy Products

Wed Sep 16 2009









CHICAGO, Sept. 16 /PRNewswire-FirstCall/ -- To respond to current misperceptions that could undermine confidence in our markets, CME Group, the world's largest and most diverse derivatives marketplace, is providing recommendations for the establishment of "hard" single exchange position limits for energy products listed at regulated exchanges.


CME Group is also proposing that the exchange administer any tailored hedge exemptions for eligible market participants and that its regulator, the Commodity Futures Trading Commission (CFTC), be given expanded authority to impose and enforce aggregate position limits across over-the-counter (OTC) and all applicable U.S. derivatives markets. The methodology for establishing the position limits and other recommendations are detailed in a newly released paper titled, "Excess Speculation and Position Limits in Energy Derivatives Markets."


The new limits, which would include single-month and all-months combined, would be in addition to the existing hard position limits during the last three trading days of the expiration months, and will commence when all CFTC-regulated exempt commercial markets and foreign boards of trade synchronize a start date.


"We recognize that misperceptions can undermine confidence in well-functioning markets, which is why we support the CFTC's mission to provide regulatory certainty and to ensure that the energy markets can operate efficiently. Regulatory parity, however, must be given to all markets under the CFTC's jurisdiction," said Terry Duffy, CME Group Executive Chairman. "Imposing hard limits on energy products must be delicately balanced with the need to ensure that such limits do not have a detrimental effect on the markets. We cannot and should not force market participants away from the best regulated markets to less regulated or even unregulated markets and dark pools of opaque transactions."


"We believe that our carefully designed recommendations will address perceived issues and provide a solution for those seeking to impose hard limits while avoiding any unintended harm to the U.S. markets and their users," said Craig Donohue, CME Group Chief Executive Officer. "Multiple studies have concluded that supply and demand - and not speculators - is the underlying cause of price movement in commodity markets. Therefore, in our efforts to correct misperceptions, we must be careful not to create unintended consequences that will push the business beyond regulatory jurisdiction. Combined with expanded CFTC authority to impose and enforce position limits on all U.S. regulated and OTC markets, our markets will retain their essential roles of price discovery and efficient hedging of risk while continuing to uphold market stability, transparency and access. Our approach is intended to be administered in a way that fosters fair competition among trading venues in all markets while offering the basis for a solution that can ultimately be adopted by the CFTC and Congress."


CME Group's recommendations satisfy the following objectives:

  • Achieves the regulatory and risk management objectives of position limits
  • Allows for the expansion or contraction of the position limits with sustained changes in open interest
  • Allows for flexible and effective oversight of speculative positions inside of position limits based on market economics and market composition of different contract months by the use of concentration thresholds
  • Provides for consistent limits across contract months which offers simplicity for market participants; concentration thresholds provide appropriate guidance with respect to position concentration and are an appropriate regulatory tool for addressing potentially disruptive positions
  • Maintains the cooperation between self-regulatory organizations and the Commission envisioned by Congress in that the exchanges remain responsible for administering and enforcing exchange-specific limits and protecting the integrity of their markets, while the CFTC retains an oversight role with respect to the administration of exchange limits and is responsible for enforcing aggregate limits to protect the integrity of the broader market
  • Allows each exchange to compete based on its liquidity, technology, clearing quality, price and customer service, rather than simply fostering regulatory arbitrage associated with position limits.





CME Group's proposal in detail can be found here: Excess Speculation and Position Limits in Energy Derivatives Markets White Paper.


As the world's largest and most diverse derivatives marketplace, CME Group ( is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its trading facilities in New York and Chicago. CME Group also operates CME Clearing, one of the largest central counterparty clearing services in the world, which provides clearing and settlement services for exchange-traded contracts, as well as for over-the-counter derivatives transactions through CME ClearPort®. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk in both listed and over-the-counter derivatives markets.


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