11/20/2002
Finally, Rule 4.47 (h) 2 (i) contained a redundancy and was deleted, resulting in letters (j) and (k) to be changed to (i) and (j), respectively.
(** indicates additions; [brackets] indicate deletions)
4.47 Position Limits
(a) Aggregation. The position limits established by this rule and the position accountability levels prescribed pursuant to Rule 4.48 ("Position Accountability") shall apply to all positions held by any person, including positions in any account(s) in which such person has a financial interest of 10% or more and in any account(s) for which such person controls trading (directly or indirectly, by power of attorney or otherwise); and, in the case of positions held by two or more persons acting pursuant to an express or implied agreement or understanding, the same as if all of the positions were held by a single person. For purposes of this rule, the term "person" shall mean any individual or entity.
(b) Applicable Limits. The maximum number of futures contracts, options on such futures contracts, or any combination thereof (collectively referred to as a "position") which any person may own or control is as follows:
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*Effective as of the close of business on the second last business day of the calendar month preceding the delivery month.
(c) Computation of Positions. For purposes of this rule,
(1) equivalent of an option position shall be obtained by multiplying the preceding day's delta factor for the relevant strike price of an option, as published by the Exchange, by the number of contracts held at that option positions shall be computed as futures equivalents. The futures strike price.
(2) a long future, a long call option and a short put option are on the same side of the market. Similarly a short future, a short call option and a long put option are on the same side of the market.
(3) in calculating a spot month position, the number of con-tracts against which delivery notices have been stopped (issued) during a deliv-ery month minus the number of contracts against which delivery notices have been issued (stopped) shall be added to a long (short) spot month futures position.
(d) Enforcement of Limits.
(1) General. No member or member firm may maintain, for itself or for any customer, any position which is, or which when aggregated in accordance with section (a) of this rule is, in excess of the applicable limit for that commodity, unless (A) a request for an exemption has been filed with the Exchange, in the case of non-spot month bona fide hedging, spread and arbitrage positions, or (B) such position have been exempted from the applicable limit. If any position exceeds the limit and has not been exempted (or is not the subject of a request for a bona fide hedge, spread or arbitrage exemption in non-spot month contract), the member or member firm maintaining or carrying the account(s) in which the position is held immediately shall take such steps as are necessary to reduce the position below the applicable limit.
(2) Alternative Delta Factors. If a position exceeds position limits when evaluated using the previous day's delta factors, but does not ex-ceed the limit using the delta factors as of that day's close of trading, the position shall not be deemed to violate the applicable position limit.
(e) Accounts Maintained at Multiple Firms. In the event that the Exchange learns that any person maintains positions in accounts at more than one member or member firm such that the aggregate position in all the accounts ex-ceeds the applicable position limit, the Exchange may notify the members or mem-ber firms maintaining or carrying such accounts of the total positions of such accounts. The Exchange may instruct each such member and member firm to reduce the positions in such accounts within 24 hours of receipt of such instructions, proportionately or otherwise, so that the aggregate positions in the accounts at all such members and member firms does not exceed the position limit, unless during such 24-hour period a request for an exemption from the position limit is made and granted. A member or member firm receiving such instructions immediately shall take such steps as may be necessary to liquidate such number of contracts as shall be determined by the Exchange in order to cause the aggregate positions of such accounts at such member or member firms to comply with the applicable position limit. Notwithstanding the foregoing, the members and member firms may reduce the positions of such accounts by a different number of contracts than that required by the Exchange so long as after all reductions have been completed at all member and member firms carrying such accounts, the positions at all such members or member firms shall comply with the applicable position limits.
(f) Failure to Reduce Positions. In addition to any other powers, remedies and sanctions contained in the by-laws and rules, the Board, or upon request and delegation by the Board, the Control Committee, may require every member or member firm that maintains an account holding a position in excess of applicable position limits then in effect, to take immediate steps to reduce positions in such accounts to levels that do not violate such position limits and to take such other actions, within such periods and upon such terms, with respect to such accounts as the Board or the Control Committee may deem necessary or desirable.
(g) Submission of Request for Exemption.
(1) Source of Submission. A request for an exemption specified in section (h) of this rule may be submitted either by the member or member firm carrying an account for which an exemption is sought, by a beneficial owner of such account, or by a person vested with discretion to trade the account, unless otherwise provided in this rule or permitted by the Exchange.
(2) Deadline. A request for an exemption for bona fide hedging, spread and arbitrage positions must be filed within five (5) business days after a position exceeds the applicable position limit, unless the applicant is seeking an exemption for spot month positions in which case, the request must be filed and granted before the position may be increased above the applicable limit, **provided, however, that the President or his designee may in special circumstances authorize the late filing of any exemption report.** A request for any other type of exemption permitted under this rule must be filed and granted before the position may be increased above the applicable limit.
(3) Form. A request shall be submitted in such form as the Ex-change may prescribe and shall contain all information the Exchange may request in order to be considered complete.
(4) Identification of Accounts. If a member or member firm is submitting a request on behalf of the account holder or controller, the applica-tion must indicate whether the account holder or controller maintains positions for which the exemption is sought with any other member or member firm and/or has made a previous or contemporaneous request for an exemption through another member or member firm. If the request is submitted by the account holder or controller, the application shall identify each account (and the firm at which it is cleared) for which the exemption is sought and shall disclose whether a previous or contemporaneous request for an exemption has been made for the ac-count.
(5) Modifications and Supplements. If any material terms of an application for an exemption change while the Exchange is reviewing the applica-tion or during the period in which the exemption is effective, the applicant shall be responsible for the submission of corrective or updated information. An applicant also must provide such additional information as the Exchange may request to evaluate the application for an exemption or to determine the scope or duration of an exemption once granted. Should the applicant fail to submit such information to the Exchange, or if any representations contained in the ap-plication are materially false, the applicant may not rely upon the exemption granted, and the Exchange may revoke the exemption or deny the application, as the case may be.
(h) Exemptions.
(1) Bona Fide Hedging Transactions. The position limits speci-fied in section (b) of this rule shall not apply to bona fide hedging positions, as defined in CFTC Regulation 1.3(z)(1), for which an exemption has been granted (and not revoked) by the Exchange.
An application for an exemption shall include the following:
(i) an estimate of the size of the position, by con-tract, intended to be established on the Exchange, for which the ex-emption is requested;
(ii) information, including a description of the size and type of physical commitments corresponding to the contracts for which the exemption is sought, which will demonstrate that the pro-posed transactions are bona fide hedges;
(iii) a representation that the intended transactions will be bona fide hedges;
(iv) a representation that the applicant immediately will report to the Exchange any material changes in circumstances or information provided in the application; and
(v) such further information as the Exchange may re-quest.
[(2) Independently Controlled Positions. The position limits specified in section (b) of this rule shall not apply to positions carried for an "eligible entity," as that term is defined in Commodity Futures Trading Commis-sion Regulation 150.1(d), in the separate account or accounts of an "independent account controller," as that term is defined in Commodity Futures Trading Commission Regulation 150.1(e), for which an exemption has been granted (and not revoked) by the Exchange, provided, however, that the overall positions held or controlled by each account controller may not exceed the position limit applicable to each contract.
An application for this type of exemption may be filed by a member or member firm carrying an account or accounts for an eligible entity, or by a principal of an eligible entity. Such application shall include the following:
(i) An affidavit, duly notarized, of the eligible en-tity setting forth the Identity and address of each independent account controller and stating that each such named controller has been delegated authority to trade the account without further specific, day-to-day direc-tion of trading decisions and that the applicant maintains only such mini-mum control as is necessary to fulfill its fiduciary responsibilities and its duty to supervise diligently trading by such named controllers. If the applicant is an organization, the affidavit must be that of a partner, of-ficer or trustee authorized by the organization to bind the organization.
(ii) An affidavit, duly notarized, of each independent account controller certifying that the controller is registered with the Commission, in fact, exercises independent authority with respect to di-recting the trading of the account, and does not have knowledge of trading decisions by any other controller. If the independent account controller is affiliated with the eligible entity or another independent account con-troller trading for the eligible entity, the affidavit shall:
A) explain the circumstances of the affiliation;
B) describe the written procedures in place to preclude such account controllers from gaining access to, or receiving data about, trades of other account controllers including a description of document routing procedures, the physical location of such account controllers and other procedures or security arrangements which would maintain the independence of their activities;
C) certify that such trading is done pursuant to separately developed and independent trading systems and describe the circumstances of the development of the trading systems; and
D) certify that such trading has been solicited by a separate Disclosure Document that meets the standards of CFTC Regulation 4.21 and has been separately marketed from that of the applicant.
(iii) an estimate of the size of the position, by contract, intended to be established on the Exchange, for which the exemption is requested;
(iv) a representation that the applicant immediately will report to the Exchange any material change in circumstances or information provided in the application; and
(v) such other information as may be requested by the Exchange.
To remain valid, applications for this exemption must be supple-mented ten (10) business days prior to any additions of independent controllers or within ten (10) days of withdrawal by the eligible entity of trading autho-rization to an approved account controller, changes in the ownership or control of the accounts, changes in registration status of the account owners or inde-pendent account controllers, or any other material change in the application.
(i) Failure to Reduce Positions. In addition to any other powers, remedies and sanctions contained in the by-laws and rules, the Board, or upon request and delegation by the Board, the Control Committee, may require every member or member firm that maintains an account holding a position in excess of applicable position limits then in effect, to take immediate steps to reduce positions in such accounts to levels that do not violate such position limits and to take such other actions, within such periods and upon such terms, with respect to such accounts as the Board or the Control Committee may deem necessary or desirable.]
[(3)] **2** Spread and Arbitrage Positions. The position limits specified in section (b) of this rule shall not apply to spread and arbitrage positions for which an exemption has been granted (and not revoked) by the Exchange.
To be eligible for an exemption, an applicant must submit a written request to the Exchange which includes the following:
(i) an estimate of the size of the position, by contract, intended to be established on the Exchange, for which the exemption is requested;
(ii) a description of the size and type of the proposed transactions;
(iii) a representation that all of the intended transactions will be spreads or arbitrages;
(iv) a representation that such position will be traded in an orderly manner, will not be initiated or liquidated in an orderly manner, will not be initiated or liquidated in a manner calculated to cause unreasonable price fluctuations or unwarranted price changes, and will not be used in an attempt to violate or avoid Exchange rules, or otherwise impair the good name or dignity of the Exchange;
(v) a representation that the applicant immediately will report to the Exchange with any material change in circumstances or information provided in the application; and
(vi) such further information as the Exchange may request.
[(4)] **3** Commodity Swap Transactions. The position limits specified in section (b) of this rule, other than the spot month limit, shall not apply to positions intended to reduce exposure resulting from commodity swap transactions which meet all of the criteria enunciated by the CFTC in the Policy Statement Concerning Swap Transactions, 54 Fed. Reg. 30694 (July 21, 1989), and as it may be amended or interpreted by the Commission, for which an exemption has been granted, and not revoked by, the Exchange.
To be eligible for an exemption for these transactions, the appli-cant must submit a written request to the Exchange which shall include:
(i) an estimate of the size of the position, by commodity, intended to be established on the Exchange, for which the exemption is requested;
(ii) a complete description of the underlying swap exposure;
(iii) a representation that the swap transactions satisfy the criteria outlined in the Policy Statement, as such may be amended or interpreted by the Commission;
(iv) a representation that the positions which are the sub-ject of the exemption will be traded in an orderly manner, will not be initiated or liquidated in a manner calculated to cause unreason-able price fluctuations or unwarranted price changes, and will not be used in an attempt to violate or avoid Exchange rules, or other-wise impair the good name or dignity of the Exchange;
(v) a representation that the applicant immediately will report to the Exchange any material change in circumstances or in-formation provided in the application; and
(vi) such other information as may be requested by the Ex-change.
[(j)] **(i)** Review of Application for Exemption. The President of the Ex-change or his designee shall notify an applicant whether an exemption has been granted (or may continue, in the event that the applicant's request is amended) and of any limitations placed thereon, within ten (10) business days of receipt of the written submission (or amended submission, as the case may be) of the applicant and such supplemental information as the Exchange may request, or within such additional time as the Exchange may require to evaluate such filings.
[(k)] **(j)** Duration of Exemption. An exemption from a position limit will remain in full force and effect until (i) the applicant requests a withdrawal; or (ii) the Exchange revokes, modifies or places further limitations thereon. Notwithstanding the foregoing, the President or his designee may review at any time exemptions granted under this rule and may modify, revoke, or limit such exemptions as he so determines. Nothing in this rule shall in any way limit (i) the authority of the Exchange to take emergency action; or (ii) the authority of the Board, or upon request and delegation by the Board, the Control Committee to review at any time the position owned or controlled by any person and to direct that a position be reduced to the position limit prescribed in this rule. (Rule 4.47 Amended 09/07/00; **Rule 4.47 Amended 8/25/01)**