CFTC’s Proposal on Position Limits Won’t Affect Most End Users

Companies still wait for clarity on margin requirements on derivatives trades.

The Commodity Futures Trading Commission (CFTC) proposed new position limits for commodity derivatives last week, but that proposal isn’t expected to have much impact on most corporations that use derivatives to hedge risks. Meanwhile, companies are still waiting to learn whether U.S. banking regulators will require derivative end users to post margin.

The CFTC’s proposal to limit the number of contracts a single firm can hold in 28 different commodities follows a court’s rejection of a previous position-limit proposal from the commission.

There have been attempts on the Hill to eliminate the prospect of a margin requirement for corporates. In June, the House of Representatives passed a measure, H.R. 634, that would exempt corporate end users from margin requirements, by a vote of 411 to 12.

The legislation seems to be off to a good start, but Zubrod, pictured at left, notes that at this point, “nothing is really moving in the Senate, let along anything connected with Dodd-Frank.”

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