NEW YORK, Oct 4 (Reuters) - Higher trading limits in nine agricultural commodity markets remain in place despite a court ruling that knocked back regulators’ efforts to get tougher on speculation, futures exchanges said on Thursday.
The CME Group requested in April 2010 that so-called “legacy” position limits in markets including wheat and corn - which have been subject to speculative caps for decades - be increased to reflect the surge in trading volume and open interest as investors poured into the markets.
The Commodity Futures Trading Commission (CFTC) finally granted that request last November, wrapping the higher limits into the wider and much more contentious decision to toughen up the overall position limits regime, expanding it to cover a total of 28 different commodities and related swaps markets.
Although most aspects of the new regime were due to come into effect next week, including contested rules related to aggregating positions and hedging exemptions, the legacy contract limits could be raised almost immediately.
“The increased grain limits that went into effect in January will remain in effect,” a CME spokesman said. An ICE spokeswoman also confirmed that increased cotton limits remained in place.
Questions over the fate of the agricultural limits arose last week after U.S. District Judge Robert Wilkins rejected the CFTC’s position limits rule and sent it back to regulators for an overhaul, saying the CFTC had fundamentally misinterpreted the Dodd-Frank financial reforms law.
While vacating the rule, however, Wilkins made a little-noticed, specific exception for “17 C.F.R. § 150.2” -- the part of the rule mandating new, higher limits for the nine legacy markets.
Because the rest of the rule was vacated, none of the other measures that would have applied to legacy limits will come into effect on Oct. 12, as planned, granting welcome relief to traders who had decried tougher rules including the aggregation of positions held by minority-owned subsidiary firms.
The following new single- and all-month limits for CME Group contracts came into effect on Jan. 17, 2012:
33,000 contracts for CBOT Corn
15,000 contracts for CBOT Soybeans
12,000 contracts for CBOT Wheat
8,000 contracts for CBOT Soybean Oil
6,500 contracts for CBOT Soybean Meal
2,000 contracts for CBOT Oats
The IntercontinentalExchange increased its cotton No. 2 contract single-month position limits from 3,500 to 5,000 contracts effective March 19. The all-months and spot-month limits remained at 5,000 and 300, respectively.
Position limits were raised in tandem for Kansas City Board of Trade and the Minneapolis Grain Exchange wheat contracts.