(Jan. 24, 2014) A 10-person task force drawn from three NGFA committees - Risk Management, Country Elevator, and Finance and Administration - has been analyzing a proposed rulefrom the Commodity Futures Trading Commission (CFTC) that would redefine the parameters of a bona fidehedge and implement new methodologies for establishing federal speculative position limits as contained in the Dodd-Frank law.  The task force's findings and recommendations will be forwarded to the Risk Management Committee, which has the lead role in formulating NGFA comments to the CFTC, and to the other two committees. 

Generally, issues surrounding the new definition of bona fide hedging are of paramount concern. 

The CFTC's proposed rule would result in some transactions previously considered by both industry and the commission as bona fide hedges to be outside the new definition - anticipatory hedging has been identified as an area of particular concern.  In addition, the proposed rule would set new spot-month position limits based on a percentage of deliverable supplies of a given commodity, and an all-months-combined limit based on a percentage of open interest. 

The text of the lengthy proposed rule can be accessed online.  Deadline for comments to the CFTC is Feb. 10; NGFA members are invited to provide input to Todd Kemp at tkemp@ngfa.org.

Once the NGFA comment letter is submitted to the CFTC, additional details will be reported in the NGFA Newsletter in early February.

By Todd Kemp, Vice President of Marketing and Treasurer

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