(Updates with links)
Jan 14 The top U.S. futures market regulator on Thursday proposed sweeping rules to limit the influence of big traders in energy markets.
The Commodity Futures Trading Commission said the proposed regulations are aimed at preventing excessive concentration and speculation in these markets.
Below are some key details from the CFTC's proposal. For more information, please see [ID:nCFTCREG]
> Proposed rulemaking Q+A: r.reuters.com/ryh63h
> Proposal to set position limits: r.reuters.com/qyh63h
-- CFTC's proposed position limits would apply to natural gas, crude oil, heating oil and gasoline futures and options contracts traded on NYMEX and ICE.
-- Unlike position limits already imposed in some agriculture markets, these energy rules establish aggregated position limits across physically settled and cash-settled contracts, across reporting markets and at the owner level.
-- Aggregate limits are set by a formula based on open interest.
-- The all-months-combined position limit would be 10 percent of the first 25,000 contracts of open interest and 2.5 percent of open interest beyond 25,000 contracts.
The single-month position limit is set at two-thirds of the all-months-combined position limit. The spot-month limit in the physical delivery contract is 25 percent of the estimated deliverable supply.
-- For a small reporting market, the all-months-combined limit would be up to 30 percent of a contract's total open interest on that exchange.
-- A trader holding cash-settled contracts would be subject to a spot-month position limit of five times the level fixed for the cash-settled contract's physically-settled counterpart if the trader holds no physically-settled contracts in the spot month.
Otherwise, traders would be subject to the same limit fixed for a contract's physically settled counterpart.
-- Entities using the futures markets to hedge commercial risks, or bona fide hedgers, would still be exempt from position limits under this proposal.
-- Swap dealers establishing positions to offset customer initiated swap positions could qualify for a limited risk management exemption for positions held outside the spot month.
The limited risk management exemption for swap dealers would be administered by the CFTC and the names of exempted dealers would be publicly disclosed. (Compiled by Ayesha Rascoe; Editing by Lisa Shumaker)