Alert December 06, 2011

CFTC Adopts Final Rules on Position Limits Which ISDA and SIFMA Challenge in Federal District Court

By a 3-2 vote, the CFTC adopted final rules that establish a position limits regime for 28 exempt and agricultural commodity futures and options contracts and physical commodity swaps that are economically equivalent.  The CFTC’s action includes approval of an interim final rule regarding spot-month position limits on which public comment may be submitted no later than January 17, 2012.  The International Swaps and Derivatives Association (ISDA) and the Securities Industry and Financial Markets Association (SIFMA) subsequently filed a complaint in the U.S. District Court for the District of Columbia seeking to have the final rules vacated on the grounds that the CFTC failed to make findings required by the Commodity Exchange Act (the “CEA”) regarding the necessity and appropriateness of the final rules; the CFTC failed to conduct the cost/benefit analysis mandated by the CEA; the CFTC’s action did not meet standards applicable to federal agencies regarding the rationale and supporting evidence for rulemaking; and the CFTC provided insufficient notice of the proposed basis for its rulemaking.