In three separate comment letters, SIFMA, the Asset Management Group of SIFMA (“SIFMA AMG”) and ISDA submitted comments to the CFTC on the proposed Position Limits for Derivatives and Aggregation of Position Limits rules (“Proposal”).
SIFMA and ISDA submitted both a legal analysis of the Position Limits for Derivatives Proposal and comments, stating that they remain “deeply concerned” with many aspects of the Proposal and continue to challenge the fundamental premise on which the CFTC argues that it has authority to impose position limits under Dodd-Frank. The groups stated that they do not believe the CFTC should go forward with the Proposal until it is able to demonstrate that the statutory prerequisites for imposing position limits have been satisfied, and that the CFTC has evaluated the costs and benefits of the rules.
SIFMA AMG additionally submitted comments regarding the Position Limits for Derivatives Proposal, stating that it recognizes regulatory action may be appropriate under certain circumstances in order to achieve CEA goals for setting position limits, but that it continues to question whether position limits would achieve those goals. SIFMA AMG explained that the CFTC has not met the statutory requirements of the CEA in proving that speculative position limits are “necessary” and “appropriate,” and that the Proposal should be withdrawn to make the needed findings.
SIFMA AMG also commented on the Aggregation of Position Proposal, stating that it has concerns with certain aspects of the Proposal and making recommendations to areas including (i) owned entity aggregation, (ii) investment in accounts or pools with “substantially identical trading strategies” (iii) passive investors in CFTC Rule 4.13 (“Exemption from Registration as a Commodity Pool Operator”), and (iv) independent account controller exemption.
Lofchie Comment: The CFTC’s cost-benefit analysis is weak and vulnerable to challenge. The better use of the Commission’s resources would be to undertake a truly independent study of the economics rather than proceed on its current course and adopt a rule likely to be heading to court. A genuinely independent study, in whatever form, could perhaps serve to establish a consensus on a final rule (or the rejection of a rule). At least then, there would be a basis for a decision motivated by policy and not perception.
See: SIFMA and ISDA Letter and Analysis; SIFMA AMG Letter on Position Limits; SIFMA AMG Letter on Aggregation of Positions.
Related news: CFTC Issues Proposed Position Limits Rule (Fed. Reg.) (December 13, 2013).