The US Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) has issued an Advisory regarding the treatment of bona fide hedging transactions and positions under Commission Regulations 1.3(z), 1.47, and 1.48 as they existed prior to the adoption of the final rule addressing Position Limits for Futures and Swaps. 

The Division issued the Advisory at this time to remind market participants that regulations 1.3(z) and 1.48 will continue to apply to position limits under the Commission’s part 150 regulations until 60 days after the Commission and the Securities and Exchange Commission (SEC) jointly publish a rule or rules in the Federal Register further defining the term “swap.” 

After the term “swap” is further defined, the bona fide hedging provisions under regulation 151.5 in the final rule for Position Limits for Futures and Swaps will apply to exempt and agricultural commodities and regulation 1.3(z) will apply to excluded commodities.

The Advisory also clarifies that no new exemptions will be granted under regulation 1.47.  Furthermore, as provided in regulation 151.9(d), any relief granted under regulation 1.47 for swap risk management will not apply to any new swap positions entered (including positions which extend a swap with the same counterparty) 60 days after the term “swap” is further defined.